Japan economy shrinks after two years of growth, dealing a blow to prime Minister Shinzo Abe
Abe has launched a pro-spending policy blitz called ‘Abenomics’ since he took office in late 2012, combining ultra-loose monetary policy and fiscal stimulus
Japan’s economy slid into reverse for the first time in two years at the beginning of the year, hit by sluggish consumption and a winter cold snap, but analysts predicted the world’s third-largest economy would quickly rebound.
The economy contracted by 0.2 per cent quarter-on-quarter in the January-March period, compared with growth of 0.1 per cent at the end of 2017, the Cabinet Office said on Wednesday.
This brought to an end a series of eight consecutive quarters of growth, a winning streak not seen since the heady days of the “miracle” boom of the 1980s when the Japanese economy ruled the world.
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
The data will come as a blow for the vaunted “Abenomics” policies of Prime Minister Shinzo Abe, who is already under pressure over a series of scandals. But experts said they expected a pause in the growth trend rather than a prolonged downswing.
“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 yen also strengthened against other major currencies on safe-haven buying, clouding the prospects for Japanese exporters.
“There are worries about some emerging economy markets but the global economy as a whole is likely to continue its recovery for some more time. [Japan’s] GDP will likely come back to positive growth in April-June,” Minami said.
The economy was stalled by stagnant private consumption, which was flat in the January to March period after an uptick of 0.2 per cent in the final quarter of last year.
