GDP shrank by 1.3% in the first quarter! Japan's private consumption is on a downward trend

Japan's economy shrank 1.3% in the three months to March as the government reimposed coronavirus restrictions in major cities amid a surge in infections, data showed .

Before the quarter-on-quarter decline, Japan had grown in the two quarters to December, but the spread of the coronavirus during the winter halted the expansion. The government imposed a new virus state of emergency in January, urging people to stay at home and requiring restaurants to close early.

" Private consumption has been hit particularly hard by the emergency measures to contain the outbreak , " senior economist Naoya Oshikubo said in an analysis ahead of the official data release.

Data released shortly before markets opened showed private consumption fell 1.4% after two straight quarters of expansion , reflecting a slowdown in services spending.

Among them, capital expenditure, including manufacturing, fell by 1.4%, but economists said that this was only relative to the substantial growth in the previous quarter, and the economy as a whole was still showing a recovery trend .

Economists at Japan's Ministry of Commerce said the decline in private consumption was not as severe as some feared. It was mainly due to a decline in non-residential investment and public demand , while housing investment grew 1.1%, he wrote in a report. He also added that while exports grew 2.3% and imports grew 4%, net trade reduced GDP growth by 0.2% .

Economists warn that the slowdown is likely to persist as the government was forced to impose a third state of emergency in several parts of the country earlier this month. The emergency measures are tougher than in the past and have been extended to the end of May and expanded to several other regions in recent days.

Japanese economists said: " GDP will continue to decline in the second quarter of 2021. The third state of emergency imposed in April requires shorter working hours and longer vacations than before, and it may even be extended further . "

He added : " Whatever the pandemic, the Tokyo Olympics this summer, is unlikely to have a significant impact on the economy. "

In addition, Japan's vaccine rollout is relatively slow. As the medical situation is still deteriorating, the vaccine promotion is too slow and production will not return to pre-virus levels until the end of this year.

Japan's economy suffered its first annual contraction since 2009 last year, although the outbreak was not as severe as it was during the pandemic. Revised figures released showed a slightly bigger annual contraction than the initially estimated -4.7% and higher than the previous -4.8%.

Analysts do not expect Japan's economic growth to recover until the third quarter .

Japan

Private consumption

economy