Japan’s economy shrank at annual rate of 2% in Q1 2024

Robert Besser

Japan’s economy shrank at annual rate of 2% in Q1 2024

Robert Besser
19 May 2024, 09:03 GMT+10

• This week, the Japanese government said the world’s fourth-largest economy shrank at an annual rate of two percent in the first quarter of 2024 as consumption and exports declined
• Although unemployment has stayed relatively low in the world’s fourth-largest economy at some 2.6 percent, wage growth has been slow
• The Cabinet Office said that the preliminary seasonally adjusted GDP, a measure of the value of a nation’s products and services, dropped 0.5 percent from quarter to quarter in the January-March period

TOKYO, Japan: This week, the Japanese government said the world’s fourth-largest economy shrank at an annual rate of two percent in the first quarter of 2024 as consumption and exports declined.

Although unemployment has stayed relatively low in the world’s fourth-largest economy at some 2.6 percent, wage growth has been slow, and prices have risen partly due to the yen’s weakness against the U.S. dollar.

The Cabinet Office said that the preliminary seasonally adjusted gross domestic product (GDP), a measure of the value of a nation’s products and services, dropped 0.5 percent from quarter to quarter in the January-March period.

The annual rate measures what would have happened if the quarterly rate lasted a year.

In recent weeks, the Japanese yen has been trading at three-decade lows, with the U.S. dollar costing some 155 yen, which has helped tourism but stifled spending power, primarily as Japan imports almost all its energy.

The latest results were generally worse than forecasted by analysts. Sluggish consumer spending is a big problem since private consumption accounts for half of Japanese economic activity.

Robert Carnell, an analyst at ING, said car production and sales disruptions due to the safety scandal brought down overall growth, meaning that it will likely bounce back later in the year.

“Monthly activity data already shows a gradual normalization since March,” he said.

The latest data challenges Japan’s central bank to decide when to raise interest rates further, which is expected to happen in July.

Policymakers are likely to proceed with more caution in a weak economy.

Earlier this year, the Bank of Japan raised interest rates for the first time since 2007, but only from zero to 0.1 percent from minus 0.1 percent.

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