Japan revises economic growth in 1Q downward

Japan revises economic growth in 1Q downward
REVISION. People walk along a pedestrian crossing at Ginza shopping street on March 31, 2023, in Tokyo. Japan revised its earlier estimates to show that its economy contracted at a 2.9 percent annual pace in the first quarter of the year. AP

JAPAN revised its earlier estimates to show that its economy contracted at a 2.9 percent annual pace in the first quarter of the year. Meanwhile, a survey by the central bank released Monday showed conditions remain sluggish.

Analysts had expected the downward revision in the gross domestic product (GDP) data for January-March and said it was mainly based on a change in data on construction activity. The earlier estimate was of a 1.8 percent contraction in annual terms.

The quarterly survey by the Bank of Japan showed a modest improvement in business sentiment among large and medium-sized manufacturers. But details of the survey showed weakness in demand both in Japan and overseas.

“Across all industries and firm sizes, business conditions held steady at 12 percent, which is on past form consistent with (quarterly) GDP growth of around zero percent,” Marcel Thieliant of Capital Economics.

“A renewed slowdown in GDP growth this quarter would be consistent with the slump in industrial production firms were predicting for June,” he said.

A resumption of normal production among automakers after they had slowed factory lines due to shortages of computer chips last year was one factor behind the slight improvement in overall manufacturing sentiment, economists at ING Economics said.

The major highlight of the government’s downward revision for growth early this year was that public investment contracted at a 1.9 percent rate. Earlier, it was estimated to have grown three percent. Private residential, or housing, fell 2.9 percent instead of the earlier estimate of a 2.5 percent contraction.

Japan’s economy grew at a 0.1 percent annual pace in the last quarter of the year, just barely avoiding two consecutive quarters of contraction or a technical recession. It expanded at a 1.8 percent annual rate in full-year 2023.

The weakness of the Japanese yen against the U.S. dollar has benefited exporters, who see their profits earned overseas inflated in yen terms when they are brought back home. But it also has sharply increased costs for the many commodities and products Japan imports, especially oil and gas. / AP

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