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The Japanese economy is shrinking as consumers and businesses cut spending

Japan’s economy shrank in the first quarter as consumers and businesses cut spending, continuing a dismal performance dating back to last summer and complicating the picture for the central bank as it considers the timing of its next rate hike.

Gross domestic product shrank by 2% on an annual basis in the three months to March, the government said on Thursday. Economists had predicted a contraction of 1.2%. Private consumption and capital expenditure both retreated, while net exports also declined.

The report shows the economy has not grown since last spring, after updated figures for the final quarter of 2023 were revised to show the economy is flat after a slump in the summer.

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