The Japanese economy shrank 0.6% on quarter in Q1 2020, compared with the preliminary estimate of a 0.9% contraction and market consensus of a 0.5% decline. This was the first recession since 2015, as the COVID-19 crisis took a huge toll on activity and demand. Private consumption fell slightly more than anticipated (-0.8% vs -3% in Q4), while there was a significant upward revision of capital expenditure (1.9% vs -4.8%).

Meantime, government spending was flat (vs 0.2% in Q4), with public investment dropping for the first time in five quarters (-0.6% vs 0.5%). At the same time, net external demand subtracted 0.2 percentage points from growth as exports (-6% vs 0.4%) fell more than imports (-4.9% vs -2.4%). On an annualized basis, the economy contracted 2.2 % in Q1, less than the initial reading of a 3.4% contraction and compared with consensus of a 2.1% fall.