Japan’s economy contracted for the first time in a year during the March quarter, shrinking at a faster pace than expected. Preliminary government data showed real gross domestic product (GDP) contracted an annualized 0.7% in January-March, larger than the median market forecast of a 0.2% drop. This followed a revised 2.4% increase in the previous quarter. The decline was attributed to stagnant private consumption and falling exports, indicating the economy was losing support from overseas demand even before U.S. President Donald Trump’s announcement of sweeping ‘reciprocal’ tariffs. Private consumption, which accounts for more than half of Japan’s economic output, was flat in the first quarter. Capital expenditure increased 1.4%, likely due to front-loading ahead of potential Trump tariffs. External demand shaved 0.8 percentage points off GDP growth as exports fell 0.6%, while imports rose 2.9%. Domestic demand added 0.7 points to growth. The gloomy GDP data may pressure Prime Minister Shigeru Ishiba to consider cutting taxes or compiling a fresh stimulus package amid uncertainty over Japan securing exemptions from U.S. tariffs in bilateral trade talks.
— new from Reuters
