Japan's economy contracted for first time in two years in Q1 2018

Japan's economy contracted for first time in two years in Q1 2018

"There were one-off special factors in the January-March period, ranging from stock market sell-offs to higher vegetable prices due to bad weather", said Takeshi Minami, chief economist at Norinchukin.

"The Japanese economy should see a modest recovery buoyed by the global economy, with exports in particular benefitting from this, helping Japan's GDP revert back to an uptrend from Q2 2018 onwards", he said in a commentary earlier this week.

They say the preliminary real GDP fell 0.2 percent from the previous quarter.

However, a breakdown of the data shows export growth is losing momentum, expanding just 0.6 percent in the first quarter after growth of 2.2 percent October-December a year ago.

Japan's economy contracted by 0.2 percent quarter on quarter in the January-March period, the Cabinet Office reported Wednesday. In the first quarter exports expanded by 0.6% after 2.2% growth in the previous quarter.

Japanese government officials expect the decline to be temporary. However, there are concerns that trade friction with the United States could affect demand for exports.

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According to the WSJ, Capital Economics senior Japan economist Marcel Thieliant forecasts annual expansion to slow from 1.7% in 2017 to 1.2% this year.

"The economy is unlikely to continue to contract further". But with wage increases lagging inflation, consumer spending has remained flat, the latest data showed.

Maruyama of SMBC Nikko Securities.

The poor first quarter snapped a string of eight straight quarters of expansion for the Japanese economy, which had marked the longest such streak in more than three years.

The world's third-largest economy is shrinking again.

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