The Japanese economy contracted 2.0% in Q1 of 2024, compared with the market consensus of a 1.5% decline and after showing no growth in a downwardly revised figure during the previous period, a preliminary reading showed. Private consumption remained weak, declining for the fourth consecutive quarter and pointing to the steepest decline in three quarters, due to intense price pressure, languishing wage growth, and the impact of an earthquake on the first day of the year. In addition, business spending slumped after growing robustly in the prior quarter, a reflection that companies were reluctant to invest following a scandal at Toyota’s compact car unit Daihatsu that caused a suspension of output and shipments. Further, external demand deteriorated, with exports falling faster than imports. That’s compared with a positive contribution from net trade in the previous period. Conversely, government spending rose after declining in the final quarter of last year.
