Japan economy shrinks after two years of growth

Koichi Kamoshida  Getty Images Koichi Kamoshida  Getty Images

Koichi Kamoshida Getty Images Koichi Kamoshida Getty Images

The data will come as a blow for the vaunted "Abenomics" policies of Prime Minister Shinzo Abe, who is already under pressure over a series of scandals.

"This figure is worse than the consensus (Bloomberg survey median) forecast of -0.1% q-q annualized, but in line with our forecast".

Wednesday's data marked the end to eight straight quarters of economic expansion, which was the longest sequence of growth since a 12-quarter run between April-June 1986 and January-March 1989 during the asset-inflated bubble economy.

"Globally, IT-related items have been in an adjustment phase, which weighed down Japan's exports and factory output", said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

The GDP deflator fell 0.2% on year, defying forecasts for a gain of 0.3% following the flat reading in the previous three months.

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"There are worries about some emerging economy markets but the global economy as a whole is likely to continue its recovery for some more time".

Japan's economy shrank at an annualized rate of 0.6 percent in the quarter through March, as private investment and public spending declined, according to Cabinet Office data released Wednesday.

It was the first decline in nine quarters, snapping the longest stretch of continued expansion since the late 1980s. In the first quarter exports expanded by 0.6% after 2.2% growth in the previous quarter.

Business spending sank 0.1% on quarter, well shy of forecasts for an increase of 0.4% and down from 0.6% in the fourth quarter of 2017.

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

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