Japan’s January-March economic contraction was revised down to 1.8% real annual rate

Japan’s economy shrank by an annualized 1.8 percent in real terms in the January-March quarter, revised up from a previous reading of a 2.0 percent drop, as corporate capital spending fell less than initially thought, the Cabinet Office said on Monday. .

It was the first contraction in two quarters due to weak domestic demand and the effects of a security data tampering scandal at a Toyota Motor Corp. group firm that hampered production and exports.

Adjusted for inflation, Japan’s gross domestic product – the total value of goods and services produced in a country – fell 0.5 percent from the previous quarter, unchanged from the preliminary report when rounded.

The unrounded figure was a drop of 0.46 percent, compared to the previously reported 0.50 percent, which, when annualized, resulted in a 0.2 percent revision, according to the office.

Capital investment, which fell 0.8 percent in preliminary data, was revised down to a 0.4 percent decline, down for the second consecutive quarter.

Private consumption, another key component of domestic demand that accounts for more than half of the economy, fell 0.7 percent, unchanged from the previous reading.

It marked the fourth consecutive quarter of decline.

The government has maintained that the economy continues to recover moderately despite some weaknesses. But the revised data underscored its fragility as the post-coronavirus pandemic demand recovery has run its course and rising prices for everyday goods continue to weigh on consumer sentiment.

“Despite the upward revision, capital investment was weak. Japanese firms have a proactive attitude towards investment, but labor shortages are among the obstacles preventing them from moving forward with their plans,” said Yuichi Kodama, chief economist at the Research Institute. Meiji Yasuda.

Many analysts expect the economy to rebound in the April-June quarter, although uncertainty remains over the impact of the deepening auto safety test scandal on Japanese automakers that has caused deliveries of some models to be suspended.

A temporary cut of 40,000 yen ($255) in income and resident taxes began in June, the latest effort by Prime Minister Fumio Kishida, hit by faltering public support, to help families who have yet to see paychecks theirs to grow faster than inflation.

“Given that it will take longer, until around August, for wage growth to outpace rising prices, weakness in private consumption is understandable. For the coming months, tax cuts will help support families, Kodama said, expecting a modest increase. to GDP.

Exports fell 5.1 percent, a faster pace than a 5.0 percent decline in the previous report, reflecting the broader effects of the auto scandal.

The decline came despite a boost from a resurgence in inbound tourism. Spending by foreign visitors to Japan contributes to export figures.

Public investment increased by 3.0 percent, revised down from 3.1 percent.

Nominal GDP eased to an increase of 0.03 percent from 0.1 percent in the preliminary data. It grew at an annual rate of 0.1 percent, slower than the previously reported 0.4 percent.

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