A cabinet building in Chiyoda Ward, Tokyo
17:46 JST, May 16, 2024
TOKYO (Jiji Press) – Japan’s economy shrank 2% annually in inflation-adjusted real terms in January and March, the first decline in two quarters, the Cabinet Office said Thursday.
The economy was hit by fraudulent testing scandals at some car manufacturers, the consequences of which spread to private consumption, exports and corporate capital expenditure.
The contraction, which amounted to 0.5% on a non-annualized basis, was also due to stalled economic activities in areas affected by the Jan. 1 Noto Peninsula earthquake in central Japan.
In nominal terms, the country’s GDP grew by 0.1%, representing an annual increase of 0.4%.
Annual nominal GDP reached about ยฅ599 trillion, approaching the ยฅ600 billion target set in 2015 by then-Prime Minister Shinzo Abe’s government. But the result was mainly driven by price increases, making it difficult for many to feel the impact of economic growth.
Private consumption, the mainstay of domestic demand, fell by 0.7% in real terms. Tempered by the decline in car and smartphone sales and electricity consumption, this marked a fourth consecutive quarterly decline for the first time since the four-quarter period to March 2009, in which the US investment bank Lehman Brothers went bankrupt.
Service consumption fell, including expenditure on accommodation and leisure activities. But the financial services sector posted growth, possibly offset by the launch of the new Nippon Individual Savings Account, or NISA, a tax-exempt program for retail investors in January this year.
Exports fell 5%, marking the first decline in four quarters and the steepest drop since April-June 2020, shortly after the start of the COVID-19 pandemic. The slump followed production halts at some automakers.
Imports fell 3.4%, due to sluggish imports of smartphones and declining imports of crude oil and liquefied natural gas due to rising tensions in the Middle East.
Business investment fell by 0.8%, due to the suspension of commercial vehicle deliveries.
