Japan's GDP fell into negative growth in the first quarter

Our reporter Ren Chong

The preliminary statistics released by the Cabinet Office on the 16th showed that Japan's GDP in the first quarter fell 0.5% month on month and 2.0% at an annual rate. In addition, downward revised data show that GDP growth in the fourth quarter of 2023 is almost non-existent due to the downward revision of capital expenditure expectations. Reuters commented that Japan's economy shrank in the first quarter because it was "squeezed by weak consumption and external demand".

In the first quarter of this year, both domestic and foreign demand contributed negatively to Japan's economic growth. The data shows that domestic demand fell 0.2% month on month in the quarter, of which personal consumption, which accounts for more than half of Japan's economy, fell 0.7% month on month, representing four consecutive quarters of negative growth; Capital expenditure fell 0.8% month on month, and private housing investment fell 2.5% month on month. Data shows that external demand fell 0.3% month on month in the current quarter. Japan's exports fell 5.0% month on month in the quarter, the first decline in four quarters. Imports fell 3.4% month on month.

The US Bloomberg News said on the 16th that the Japanese economy shrank in the first quarter due to spending cuts by individuals and enterprises, continuing the sluggish performance since last summer. The latest data also shows that Japan's economy has not achieved growth since last spring, because the latest data of the last quarter of 2023 has been revised, showing that the economy has stagnated after the summer downturn.

According to Reuters, the devaluation of the yen has led to the dual speed development of Japan's economy: exports and tourism generally benefit from a more competitive exchange rate, but households and small businesses are squeezed by the rising cost of imported goods. Japanese policymakers are counting on substantial wage increases and planned income tax cuts to stimulate sluggish consumption and prevent further deflation. The economic contraction in the first quarter has brought new challenges to Japanese policymakers. The Bank of Japan is considering raising interest rates from near zero.

According to the Nikkei Asia Review, Japanese consumption fell for the fourth consecutive quarter as inflation outpaced wage growth. Earlier government data showed that the real wages in the first three months of 2024 fell year on year, despite the largest round of annual wage increases in more than 30 years negotiated by major trade union organizations in Japan.

Bloomberg said that Japanese authorities and business executives expressed concern about the weak yen. Although Toyota and other exporters announced strong results, the weak yen led to the rising cost of imported energy and other materials, bringing pressure on families and small businesses. ▲