Japan’s economy shrank more than estimated in first quarter
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The downward GDP revision darkens prospects for a fragile economic recovery.
PHOTO: AFP
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TOKYO - Japan’s economy shrank more than initially reported in the first quarter, the government said in a rare unscheduled revision to gross domestic product (GDP) data on July 1, darkening prospects for a fragile recovery.
The downward revision is likely to lead to a cut to the Bank of Japan’s (BOJ) growth forecasts in fresh quarterly projections due later in July, and could affect the timing of its next interest rate hike, analysts say.
Japan’s real GDP shrank 2.9 per cent year on year in January to March, down from an earlier estimate of a 1.8 per cent contraction, the revised data showed.
The real GDP for the October to December period was also revised down to an annualised 0.1 per cent growth versus the previous 0.4 per cent increase, while that for the July to September period was revised down to an annualised 4 per cent decline from the previous 3.7 per cent drop.
The government said the revisions to GDP figures for January to March reflected corrections made in construction orders data.
Dai-ichi Life Research Institute economist Yoshiki Shinke expects the GDP revisions to lead to a significant downgrade in this fiscal year’s economic growth forecast.
“I wonder if the BOJ can manage to trim bond buying and hike rates simultaneously in July, when there’s a growth downgrade showing the economy was in worse shape than thought,” he said.
The BOJ ended negative interest rates in March as it judged that sustained achievement of its 2 per cent inflation target had come into sight.
Many market players expect the BOJ to raise rates again in 2024, but remain divided on how soon it will come.
BOJ governor Kazuo Ueda has said the central bank will raise rates further if there is enough evidence that underlying inflation will durably meet its 2 per cent target, as it projects.
In other data, the business mood in Japan’s service sector soured in June as the lower yen pushed costs higher, a quarterly central bank survey showed on July 1, offsetting a big lift in factory confidence and pointing to consumption weakness. REUTERS
