Japan economy shrinks for first time in 2 years | Business| Economy and finance news from a German perspective | DW | 16.05.2018
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Business

Japan economy shrinks for first time in 2 years

The world's third-largest economy has slid into reverse for the first time in two years as a result of sluggish consumption and seasonal factors. But experts said it was not the beginning of a longer downswing.

Japan's economy contracted by 0.2 percent quarter on quarter in the January-March period, the Cabinet Office reported Wednesday.

This brought to an end a series of eight consecutive quarters of growth — a streak not seen since the heady days of the miracle boom in the 1980s.

The slight decline at the beginning of the year came as a blow to the economic policies of Prime Minister Shinzo Abe, who is already under pressure over a series of scandals.

Wage hikes not big enough

The economy was hit by stagnant private consumption, fresh data showed. "Consumers will keep purse strings tight unless the pace of wage increases shows a clear acceleration," said SMBC Nikko Securities Chief Market Economist Yoshimasa Maruyama.

Other pundits mentioned special factors that impacted growth in the first quarter. "There were one-off factors ranging from stock market sell-offs to higher vegetable prices due to bad weather," said Takeshi Minami, chief economist at Norinchukin.

Also, the yen strengthened against other major currencies on safe-haven buying, clouding the prospects for Japanese exporters.

Experts emphasized they viewed the first-quarter contraction as a pause rather than the beginning of a protracted downswing, with the global economy still picking up.

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hg/jd (AFP, dpa)

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