Japan’s GDP in the first quarter fell for the first time in 2015

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In Japan today published disappointing data on GDP growth for the first quarter of 2018. Thus, in annual terms, the gross domestic product of the country of the rising sun for the first quarter of this year fell 0.6%, while the market had expected a decline of just 0.4%. Recall that in the IV quarter of 2017 Japanese GDP also fell by 0.6% year on year, and market analysts expected some slowing of the decline in the first quarter, but the miracle did not happen.
During the quarter, Japanese GDP fell during the period from January to March by 0.2% while the market expected a decline of only 0.1%. Japan’s economy in the first quarter, thus, began to fall for the first time since the end of 2015, the Japanese press and the Western media reports about a possible resumption of the recession.
The main reasons for the decline were the decline in domestic demand and weak demand abroad for Japanese manufactured products. And the drop in demand is affected by many factors, from bad weather in the first quarter before slowing down in the growth rate of personal consumption expenditures. Weak consumer demand is also a factor slowing inflation. The Bank of Japan continues to loosen monetary policy to bring inflation to 2% per year. Thus, it can be summarized that after two years of slow but steady growth Japan’s economy returned to stagnation, although the return of recession too early to say.
From developed countries so far, only Japan is not growing, although the rest of the G7 countries on the rise. For comparison, Eurozone GDP in the I quarter of 2018 showed an increase of 2.5%, US – 2.2%. The Cabinet of Shinzo Abe have not yet lost hope for the resumption of growth, explaining to the population that the world economy is on the rise, and this should in the future have an impact on Japanese economic growth, too, wage growth should resume, and employment in Japan and all is well (unemployment below 3% of the population).
Unpleasant surprise for Japan was the return of her long-time partner of the US to protectionism, unpredictable thanks to the efforts of Donald trump, which could have a negative impact on exports of steel and of aluminium from Japan in the second quarter. The deepening of the recession along with the aggravation of trade and economic relations between Japan and the United States, according to “Alpari”, unable to resume a political crisis in Japan, and the question about mistrust to the government of Shinzo Abe may again appear in the political agenda.
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Natalia Milchakova,
The Deputy Director of analytical Department,
Alpari