Japan economy shrinks for first time in two years

Japan economy shrinks for first time in two years

The slight decline at the beginning of the year came as a blow to the economic policies of Prime Minister Shinzo Abe, who is already under pressure over a series of scandals.

He forecasts that growth will slip to 1.2 percent this year from 1.7 percent in 2017.

Capital investment was down 0.1 percent.

Economists say the contraction will be temporary, but there is a risk that trade friction with the United States will hurt export demand, meaning a strong recovery is not assured.

They said that consumers will keep purse strings tight unless the pace of wage increases shows a clear acceleration.

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According to the Japanese government, real GDP fell by 0.2% in the three months to March, undershooting expectations for an unchanged reading for the quarter. "The global economy is performing well and a yen is trading beyond 110 yen against the dollar, so once exports start to grow again, the economy will return to a moderate growth path".

Japan's gross domestic product contracted at an annualized rate of 0.6% in the first quarter of 2018, according to government data published Wednesday.

The Japanese economic system has been comparatively wholesome in latest quarters, selecting up from the doldrums that spanned earlier a long time, on extraordinarily free lending and a authorities program created to combat deflation - the continuous spiraling down of costs. In the first quarter exports expanded by 0.6% after 2.2% growth in the previous quarter.

However, a breakdown of the data shows export growth is losing momentum, expanding 0.6 percent in the first quarter after growth of 2.2 percent expansion in the fourth quarter.

But consumer spending has remained stubbornly lacklustre, with companies staying stingy on wage hikes despite healthy profits.

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