TOKYO — The Japanese economy shrank by 1.8% on an annual basis in the first quarter of this year, slightly better than the previous month the initial estimate of a contraction of 2.0%according to revised government data Monday.
The revision was due to private sector investment, which stood at minus 0.4%, up from the previous minus 0.5%.
Seasonally adjusted real gross domestic product, or GDP, a measure of the value of a country's products and services, remained in negative territory as exports and consumption fell from the previous quarter.
The economy fell 0.5% quarter-on-quarter in the January-March period, unchanged from last month's results, according to the Cabinet Office.
The annual interest rate measures what would have happened if the quarterly interest rate had lasted a year.
Wage growth has been sluggish and import prices have risen, while the Japanese yen has fallen against the US dollar. The dollar has been trading at nearly 157 yen lately, compared to about 140 yen a year ago.
The weak yen has done just that tourism is flourishing. But it makes imports more expensive, a sore point for a country that imports almost all its energy. Slow consumer spending has also put a damper on the economy. Private consumption accounts for half of Japan's economic activity.
Another negative is the ongoing scandal involving improper vehicle model testing at several major automakers, including Toyota Motor Corp., which are the pillars of Japan's brand power. Production was stopped on some models.
Government officials raided Honda Motor Co.'s headquarters on Monday. in Tokyo. According to Japanese media reports, Mazda Motor Corp. will be raided soon. Toyota and Suzuki Motor Corp. have already been robbed.
Last week, Toyota Chairman Akio Toyoda apologized for the massive fraudulent testing using inadequate or outdated crash test data, improper tests of airbag deployment, rear seat crash damage and engine power.
The safety of the vehicles is not affected, but the companies apparently wanted to speed up the testing process.
Investors are also closely watching the next move from the Bank of Japan, whose monetary policy board meets later this week. The central bank raised interest rates earlier this year for the first time since 2007, but only within a range from zero to 0.1% and from minus 0.1%.
“The Japanese central bank's stance will also be closely watched, especially with the domestic currency weak. Japanese manufacturers are facing the fastest increase in input costs,” says S&P Global Market Intelligence said in a report.
Unemployment in the world's fourth largest economy has remained relatively low at around 2.6%. Japan suffers a serious labor shortagelike it the birth rate continues to decline, which reached a record low last year. The number of marriages has also fallen.
Such demographic trends could prove more dangerous in the long run, according to some analysts, who worry that Japan is particularly weak in terms of output per capita and that its declining influence on the world stage could even lead to security risks.
Japan's GDP is expected to decline No. 5 in size after the US, China, Germany and India next year, the IMF said.
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Yuri Kageyama is at X: https://twitter.com/yurikageyama
