JAPAN’S economy shrank for the first time in a year and at a faster pace than expected, data for the March quarter showed yesterday, underscoring the fragile nature of its recovery now under threat from US President Donald Trump’s trade policies.
The data highlights the challenge policymakers face as steep US tariffs cloud the outlook for the export-heavy economy, particularly for the mainstay automobiles sector.
Real gross domestic product (GDP) contracted an annualised 0.7 per cent in January-March, preliminary government data showed, much bigger than a median market forecast for a 0.2pc drop.
The decline was due to stagnant private consumption and falling exports, suggesting the economy was losing support from overseas demand even before Trump’s announcement on April 2 of sweeping “reciprocal” tariffs.
The data did highlight some brighter aspects, which included GDP growth being revised up slightly to 2.4pc from 2.2pc for the final quarter of last year.
Capital expenditure rose a faster-than-expected 1.4pc, helping domestic demand add 0.7 percentage point to GDP growth.
Overall, however, analysts were cautious about the softer demand impulse and risks to the outlook from a Trump-led change to the global trade order.
On a quarter-on-quarter basis, the economy shrank 0.2pc compared with market forecasts for a 0.1pc contraction.
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