Japanese first quarter GDP shows contraction as trade tension hit industrial exports

Japanese first quarter GDP shows contraction as trade tension hit industrial exports

Japan’s Finance Ministry is expected to release data today on the first quarter GDP growth of the world’s third largest

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Photo: Reuters

Japan’s Finance Ministry is expected to release data today on the first quarter GDP growth of the world’s third largest economy.

The information is expected to show that Japan’s economy contracted slightly in the first quarter as exports, consumer spending and investment faltered due to the on-going US-China trade war. Japan’s manufacturing sector has been hit especially hard, with industrial output in the country falling from January to March at the fastest pace in almost five years. Exports are forecast to have declined approximately 1.8% in the last year alone.

Despite the anticipated slowdown in Japan this quarter, any decline in GDP is likely to be temporary as Washington and Beijing continue to discuss a potential agreement to end the trade war and China’s economy shows signs of stabilisation from a recent stimulus.

High retail sales and a recent Bank of Japan promise to keep interest rates low for at least another year further supports this. Japan’s retail sales—a key gauge of private consumption that makes up about 60% of the economy—rose about 1.0% in the last year, more than a 0.8% gain expected by economists. Likewise, a promise to keep rates low continues to dispel uncertainty over the Japanese government’s commitment to supporting the economy and managing inflation.

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