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The Japanese economy decreased for the first time in the year, which made a contract by 0.2% in the March quarter, when exports decreased sharply, the government’s preliminary data on Friday showed.
The gross domestic product was poor compared to the 0.1% reduction, which is expected by economists surveyed by Reuters.
Japan’s annual GDP decreased by 0.7% in the first quarter, as well as more than 0.2% expected in the Reuters survey.
Exports decreased by 0.6% quarter, dropping 0.8 percentage from GDP because the uncertainty caused by US trade policy Donald Trump affected the Japanese economy. The domestic demand, however, was a bright place that increased by 0.6% in the same quarter and adding 0.7 percentage points to GDP.
However, from year to year, Japan’s GDP increased by 1.7%, which is the highest expansion from the first quarter of 2023 and a more stronger figure compared to the rise of 1.3%, which is observed in the fourth quarter.
Japan’s GDP data is coming at a time when the country is recorded in trade negotiations with the United States, while the initial negotiations between both parties still do not give a convincing deal.
Esper Kol, Expert Director of the Financial Services Monex Group, told CNBC that while Japanese companies are “very strong houses”, reflecting the growth of domestic demand, export may continue to see weakness.
He noted that, despite the fact that the weak yen gave a competitive advantage for Japan’s export, the advantage was “overwhelmed” by the Chinese machine and export tools that have the best after sales compared to Japan and are of good quality.
On Friday, the main trade negotiator in Japan, Royas Pavazov, said there was no noticeable effect on the US on GDP in the first quarter in Japan.
However, he warned about the shortcomings of the US trade policy and that the government will “take all the necessary steps” to support the affected companies.
While improving jobs and wages is likely to be at the heart of moderate economic recovery, it stated that the risks remain in consumer moods and consumption as a result of persistent prices.
Krishna Bchimovarapa, the Asia-Pacific Economist State Street Global Advisors, said while the GDP growth rate was lower than its assessment, the internal requirement was “very good”.
Bchimavor is waiting for a “reasonable business from the US” in the coming months, which will mitigate the tariff impact.
“All this will mean that the Bank of Japan will be comfortable sitting in Baku until there is a certainty, because we expect only one hike this year, perhaps in Q4,” he added.
Bank of Japan held rates 0.5% on May 1 for the second direct meeting.
Boj also recently warned On May 13, the country’s economy is likely to be moderately going forward, saying it would be related to the consequences of trade policy worldwide.
“Negative demands of demand are expected, including the impact of increased uncertainty on fixed business investments and consumption of households, decreased exports to the US and deterioration of Japan’s export profitability,” Boj writes.
The US tariff policy will put pressure on both economic activities and prices in Japan, the Central Bank noted.
Despite these problems with growth, the central bank seems Some Boj Council members say The target of the bank inflation of 2%will probably be realized and it will continue to raise the policy rate if its prospect of economic activity and prices are reached.
Inflation in Japan Three years exceeded the 2% Boj target, having recently come 3.6% in April.
However, other board members also warned that the worldview was uncertain and that the bank should “study the possibility both up and down from its worldview and, if necessary, pursue a monetary policy.”
