Japan's First Quarter GDP Growth Seen Slowing Sharply In Setback For 'Abenomics'

Japan’s economy expected to show sluggish growth in first quarter

Tokyo stocks opened lower Wednesday following Wall Street's overnight decline and on reports just before the opening bell that Japan's economy shrunk at an annualized rate of 0.6 percent in the January-March quarter.

Japan's economy shrank in the first quarter of 2018 for the first time in two years, ending the longest stretch of economic growth since the 1980s.

Japan's economy relies on exports of electronics, among other products.

The economy was dragged down by sluggish private consumption and capital expenditure.

"Globally, IT-related items have been in an adjustment phase, which weighed down Japan's exports and factory output", said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

But potential fallout from Sino-U.S. trade frictions and global protectionism cloud the outlook for Japan's export-reliant economy in the coming quarters, they say.

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In the first quarter exports expanded by 0.6% after 2.2% growth in the previous quarter.

That marked the end of the longest sequence of growth since a 12-quarter run between April-June 1986 and January-March 1989 during the asset-inflated bubble economy.

Capital investment was down 0.1 percent.

That works out to an annualized contraction of 0.6 percent.

GDP is expected to be flat on quarter and slip 0.1% on year after adding 0.4% on quarter and 1.6% on year in the three months prior.

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