AP

Japan’s economy contracts, but at smaller rate than thought

Jun 7, 2022, 8:20 AM | Updated: 8:50 pm

FILE - People walk across the famed Shibuya scramble crossing as the sun sets behind the skyscraper...

FILE - People walk across the famed Shibuya scramble crossing as the sun sets behind the skyscraper Monday, Oct. 11, 2021, in Tokyo. The Japanese economy contracted in the first quarter, but at a smaller rate than earlier estimated, the government said Wednesday, June 8, 2022. The world’s third-largest economy contracted at an annual rate of 0.5%, according to Cabinet Office data. That was smaller than the 1.0% contraction in the preliminary estimate for Japan’s real gross domestic product, or GDP, released in May. (AP Photo/Kiichiro Sato, File)

(AP Photo/Kiichiro Sato, File)


              FILE - People walk along the streets full of bars and restaurants Oct. 1, 2021, in Shibuya, an entertainment district of Tokyo, as Japan fully came out of a coronavirus state of emergency for the first time in more than six months. The Japanese economy contracted in the first quarter, but at a smaller rate than earlier estimated, the government said Wednesday, June 8, 2022. The world’s third-largest economy contracted at an annual rate of 0.5%, according to Cabinet Office data. That was smaller than the 1.0% contraction in the preliminary estimate for Japan’s real gross domestic product, or GDP, released in May. (AP Photo/Kiichiro Sato, File)
            
              FILE - People walk across the famed Shibuya scramble crossing as the sun sets behind the skyscraper Monday, Oct. 11, 2021, in Tokyo. The Japanese economy contracted in the first quarter, but at a smaller rate than earlier estimated, the government said Wednesday, June 8, 2022. The world’s third-largest economy contracted at an annual rate of 0.5%, according to Cabinet Office data. That was smaller than the 1.0% contraction in the preliminary estimate for Japan’s real gross domestic product, or GDP, released in May. (AP Photo/Kiichiro Sato, File)

TOKYO (AP) — The Japanese economy contracted in the first quarter, but at a slower pace than earlier estimated, the government said Wednesday.

The world’s third-largest economy contracted at an annual rate of 0.5%, according to Cabinet Office data. That was smaller than the 1.0% contraction in the preliminary estimate for Japan’s real gross domestic product, or GDP, released in May.

The annual rate shows how the economy would have grown if the quarterly rate were to continue for a year. Japan’s economy contracted 0.1% in January-March from the previous quarter, better than the 0.2% quarter-on-quarter contraction in the preliminary data.

Consumer spending and other private demand was stronger than previously thought.

The upward revision was a pleasant surprise for analysts.

“Looking ahead, we expect GDP to rebound in 2Q mainly due to better private consumption, yet higher inflation on commodities will likely limit the gains in real terms,” Robert Carnell, regional head of research Asia-Pacific at ING, said in a report.

The expected reopening of the country to tourists as limits imposed to curb COVID-19 infections are lifted, should also boost growth.

On the negative side, Japan, which imports almost all its oil, much of its food and various products, has been slammed by rising prices for energy and other commodities, partly because of the war in Ukraine.

Japan has for years been fending off deflation, or a spiraling down of prices. Low wage growth and an aging and shrinking population have slowed economic activity and discouraged corporate investment.

Bank of Japan Gov. Haruhiko Kuroda apologized Tuesday for recently referring to a “tolerance for higher prices” among Japanese people, a comment interpreted as welcoming higher prices. Kuroda was grilled in parliament, where he told legislators his comment was inappropriate.

Kuroda has championed a policy aimed at boosting near-zero inflation to around 2%, but progress was slow until global prices for oil and other commodities surged in recent months.

Some analysts say Japan has gradually lost its competitive edge because it hasn’t done enough to nurture innovation and free up new sources of growth bridled by old-time bureaucracies.

One source of worry is the diving value of the yen, now trading at a 20-year low of about 133 yen to the U.S. dollar.

Although a weak currency is a boon for Japanese exporters, boosting the value of overseas earnings, analysts say the weak yen also reflects a weak economy. Rising interest rates in the U.S. and other countries compared to Japan, where interest rates are at near zero, will likely keep the yen weak for some time.

Prime Minister Fumio Kishida is pushing what he calls “new capitalism.” He announced an outline of his strategy this week, aimed at jump-starting growth by pushing digitization, defense spending, start-up ventures and sustainable energy. He has also invited investments, declaring in English, “Invest in Kishida.”

Former Prime Minister Shinzo Abe, Japan’s longest serving leader, pushed “Abenomics,” focused on super-easy lending that was meant to spark inflation and therefore promote growth. Some critics say Abenomics failed to build a strong economy and its pitfalls are part of the reason now behind the weak yen.

___

Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Image: A cargo ship is stuck under the part of the structure of the Francis Scott Key Bridge after ...

Associated Press

Authorities identify 2 bodies recovered at site of Baltimore bridge collapse

A major bridge in Baltimore snapped and collapsed after a container ship rammed into it early Tuesday, and several vehicles fell into the river below.

19 hours ago

Photo: Mountaineer Jim Whittaker has died at 95....

Gene Johnson, The Associated Press

Lou Whittaker, among the most famous American mountaineers, has died at age 95

Lou Whittaker, a legendary American mountaineer who helped lead ascents of Mount Everest, K2 and Denali, has died at age 95.

20 hours ago

File photo: Former Sen. Joe Lieberman speaks in Washington on Jan. 18, 2024....

Associated Press

Former Sen. Joe Lieberman, Democrats’ VP pick in 2000, dead at 82

Former U.S. Sen. Joe Lieberman of Connecticut, who nearly won the vice presidency on the Democratic ticket with Al Gore in 2000, has died.

20 hours ago

islamic state attack...

Vanessa Gera, The Associated Press

What we know after the Islamic State group claims responsibility for Moscow massacre

The Islamic State group has claimed responsibility for an attack on a suburban Moscow concert hall that killed at least 133 people.

4 days ago

Moscow shooting...

The Associated Press

Russia: 60 dead, 145 injured in concert hall raid; Islamic State group claims responsibility

Assailants burst into a concert hall in Moscow on Friday and sprayed the crowd with gunfire, killing over 60 people, injuring more than 100.

6 days ago

Photo: Britain's Kate, Duchess of Cambridge visits 282 (East Ham) Squadron, RAF Air Cadets, Cornwel...

Associated Press

Kate Middleton announces she has cancer, is undergoing chemotherapy

Kate Middleton, Princess of Wales, says she is undergoing chemotherapy to treat cancer. She has been out of view since Christmas.

6 days ago

Japan’s economy contracts, but at smaller rate than thought