Japanese Economy Shrinks by 1.8% in Q1 2024

Japanese Economy Shrinks by 1.8% in Q1 2024

Key Points:

  • The Japanese economy shrank by 1.8% annualised, slightly better than the initial -2.0% estimate.
  • Declined by 0.4%, impacted by global market uncertainties and the Daihatsu scandal.
  • Increased by 3.0%, driven by government infrastructure projects to support economic stability.

Japan’s economic performance in the first quarter of 2024 showcased a significant contraction. The inflation and seasonally adjusted annualised rate reflected a decline of 1.8%, slightly improving from the initial estimate of -2.0%. In nominal terms, the annualised rate was recorded at 0.1%, down from a preliminary report that indicated a 0.4% increase. These figures highlight ongoing challenges in the Japanese economy. They hint at the complexities policymakers face. Stabilising growth and curbing inflation are particularly difficult.

Corporate Investment Declines by 0.4%

Corporate capital spending experienced a notable decline of 0.4%, which, while alarming, was an improvement over the preliminary report’s 0.8% decrease. This reduction can be largely attributed to uncertainties in the global market and internal factors, such as the recent test fraud scandal involving Daihatsu Motor Co. This incident significantly impacted corporate sentiment, leading to a cautious approach towards investment in capital goods.

Japanese Economy: Personal Consumption Drops 0.74%

Personal consumption in Japan fell by 0.74% during this period, marginally higher than the preliminary report’s estimate of a 0.68% decline. The decrease in spending was evident across various sectors, including phones, expressways, games, and non-alcoholic beverages. This decline underscores the cautious spending behaviour of consumers amid economic uncertainties and reflects broader trends of reduced discretionary spending.

Public Investment Rises by 3.0%

Contrary to the overall economic downturn, public investment in Japan grew by 3.0%, slightly below the preliminary report’s growth of 3.1%. This increase represents the government’s efforts to bolster economic activity through infrastructure projects and other public works. Such investments are crucial for supporting economic stability and providing a buffer against private sector volatility.

Japan’s Trade: Exports Down 5.1%, Imports 3.3%

Japan’s trade sector also experienced setbacks, with exports declining by 5.1%, a marginal increase from the preliminary estimate of 5.0%. Imports decreased by 3.3%, slightly better than the initial report’s 3.4% decline. These reductions were partly influenced by a drop in vehicle production following the Daihatsu Motor Co. scandal, which disrupted supply chains and dampened trade activity.

Japanese Economy: 2023 GDP Steady at 1.2%, ¥558 Trillion

Reflecting on the fiscal year 2023, Japan’s real GDP growth was 1.2%, with the GDP value standing at ¥558 trillion. This figure remained unchanged from the preliminary estimate, indicating a steady yet modest growth trajectory. As the country navigates the complexities of the global economic landscape, these insights provide a foundation for future policy decisions to sustain and enhance economic resilience.