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Japan upgrades Q1 GDP on smaller hit to domestic demand

08 June 2021 17:02 (UTC +04:00)

Japan's economy shrank less than initially reported in the first quarter on smaller cuts to plant and equipment spending, but the coronavirus pandemic still dealt a huge blow to overall demand.

Separate data showed growth in bank lending slowed sharply in May, while real wages posted the biggest monthly jump in more than a decade in April, in signs that the world's third-largest economy was gradually overcoming last year's pandemic hit.

Among the mixed indicators are some reassuring signs for policymakers, who are worried Japan's recovery will lag major economies that have rolled out COVID-19 vaccines much quicker and are able to reopen faster.

The economy shrank by an annualised 3.9% in January-March, not as bad as the preliminary reading of a 5.1% contraction, but still posting the first fall in three quarters, Cabinet Office data showed Tuesday, APA reports citing Reuters.

The reading, which beat economists' forecast for a 4.8% decline, equals a real quarter-on-quarter contraction of 1.0% from the prior quarter, versus a preliminary 1.3% drop.

The revised gross domestic product (GDP) decline was mainly due to a smaller fall in public and capital spending, which both eased less than initially thought, offsetting a slightly larger fall in private consumption.

"Overall, capital spending and private consumption remained weak, which showed weakness in domestic demand," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"The vaccine issue is the most important thing for the (economic) recovery," he said, adding that the vaccination rate would need to come to about 50% to boost economic recovery prospects.

Capital spending shrank 1.2% from the prior quarter, better than a preliminary 1.4% decrease, and matching the median forecast for a 1.2% loss. Government consumption fell 1.1%, a smaller drop than a preliminary 1.8% decline.

Private consumption, which makes up more than half of gross domestic product, dropped 1.5% from the previous three months, worse than the initial estimate of an 1.4% drop.