Japan’s economy likely shrank less than initially estimated in the first quarter, reinforcing views that it will quickly regain traction in coming months, a Reuters poll found on Wednesday.
Weighed by weak domestic demand and a slowdown in exports, the world’s third-largest economy probably shrank an annualised 0.4 per cent in the first quarter, less than a preliminary reading of a 0.6 per cent contraction, the poll of 16 economists showed.
On a quarterly basis, growth was expected to dip 0.1 per cent, marginally less than a 0.2 per cent fall indicated in preliminary data. Revised figures will be released on Friday.
Expectations of a milder contraction were driven by a less pessimistic view of company spending. Capital expenditure was seen rising 0.2 per cent for the quarter, up from a 0.1 per cent decline in the preliminary data.
“The expected upgrade in capital spending likely helped the GDP to revised up,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. “But there is no change that the economy came to a temporary standstill at the beginning of this year after having grown solidly.”
Recession on the way?
Many economists project the economy will rebound in April-June and return to a moderate growth trend, but weak data on Tuesday raised the possibility of a recession. Household spending unexpectedly fall in April and services sector activity slowed in May. Also industrial production grew less than expected in April.
“We expect the economy will grow in the second quarter but the latest data suggest we need give heed to a possibility of a slower pace of recovery than previously expected,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley.
The Cabinet Office will issue revised GDP data at 8:50 AM on Friday June 8 Japan time (2350 GMT on June 7). The first-quarter contraction ended Japan's longest period of economic expansion since its 1980s bubble economy.