By Satoshi Sugiyama
TOKYO (Reuters) – Japan’s economy probably contracted for the first time in a year in the first quarter, weighed down by softer domestic demand and imports outperforming exports, a Reuters poll showed, as U.S. President Donald Trump’s trade policies dim the growth outlook.
Real gross domestic product (GDP) is forecast to have contracted an annualised 0.2% in January-March, according to a median forecast of 15 economists. That would mark a significant cool down from the previous quarter’s 2.2% expansion and would be the first contraction since the first quarter last year.
On a quarter-on-quarter basis before annualisation, the first-quarter growth rate was projected at -0.1%, compared with growth of 0.6% in the fourth quarter.
Private consumption, which accounts for more than half Japan’s economic output, likely inched up 0.1% in the first quarter. Analysts say higher food costs are partly the reason consumers are holding back on spending.
“The employment and income situation remains favourable, but consumer sentiment is weakening due to factors such as rising prices and increased thriftiness,” said Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting.
Capital expenditure was seen up 0.8%, attributed to upbeat corporate performances.
External demand, or net exports, which means shipments minus imports, likely shaved 0.6 percentage off GDP growth.
Exports were expected to have increased for the fourth consecutive quarter as businesses rushed to ship cars overseas before tariffs took effect. However, Kobayashi said imports probably increased more than exports, resulting in a net negative.
The GDP data will be announced on May 16 at 8:50 a.m.(2350 GMT on May 15).
The Bank of Japan on Thursday decided to keep interest rates steady and cut its growth forecasts, suggesting that uncertainty over U.S. tariffs and the hit to exports could keep policy in a holding pattern for some time.
Rising trade tensions from Trump’s sweeping tariffs have sent shockwaves through markets and led to a sharp downgrade in the International Monetary Fund’s global growth forecasts.
(Reporting by Satoshi Sugiyama; Editing by Kim Coghill)
Comments