By Max Sato
(MaceNews) – Japan’s economy marked the first quarter-on-quarter contraction in three quarters in January-March, but the decline was slower than previously reported as the drops in business and government investment were slightly smaller than initially estimated, Cabinet Office data released Tuesday showed.
In revised Q1 GDP data, consumer spending was revised down slightly and remained the largest factor behind the contraction.
Economists expect only a modest rebound in the April-June quarter as a resurgence in coronavirus inflections prompted the government to call on people to stay home and businesses to limit operating hours during most of the three-month period.
Before Tuesday’s revised GDP data, economists on average had revised down their forecasts and expected the domestic economy to rebound just 1.84% at an annualized rate in April-June, instead of 5.63% projected earlier, according to the latest monthly ESP Survey of 37 forecasters by the Japan Center for Economic Research released on May 13.
Q1 GDP Upward Revision Stronger Than Forecast
Gross domestic product fell a real 1.0% on quarter, or an annualized 3.9%, in the first quarter of 2021, revised up from the initial estimate of -1.3%, or -5.1% on an annualized basis, due to smaller-than-expected drops in capital investment and public works spending as well as a larger-than-expected rise in private-sector inventories.
The revised figures were firmer than the median economist forecast of a 1.2% decline (-4.8% annualized).
GDP rose 2.8% on quarter, or an annualized +11.7%, in October-December 2020 after surging 5.3%, or an annualized +22.9%, in July-September, which was the fastest growth under the current GDP formula dating to 1994.
Total domestic output dipped 1.6% (revised up from the initial reading of -1.9%) from a year earlier in January-March, posting the sixth straight quarter of year-on-year decline after falling 1.1% in October-December. The recent pace of contraction decelerated from -5.6% in July-September and -10.1% in April-June of 2020, when the first wave of coronavirus infections caused a plunge in demand around the world.
At the height of the pandemic slump in the April-June quarter of 2020, Japan’s GDP marked the deepest contraction on record, down 8.1% q/q, or an annualized 28.6%.
Other details from revised (second preliminary) Q1 GDP data
In Q1, domestic demand pushed down total domestic output by 0.8 percentage points (revised up from -1.1 points) after raising Q4 GDP by 1.8 percentage points.
Net exports – exports minus imports – trimmed an unrevised 0.2 percentage point from Q1 GDP after raising Q4 growth by 1.0 percentage point.
Exports of goods and services rose a revised 2.2% on quarter in January-March after surging 11.7% in October-December. Imports gained a revised 3.9% after rising 4.8% in the previous quarter.
Private consumption, which accounts for about 55% of GDP, fell 1.5% (revised down from a preliminary 1.4% decline) on quarter in Q1. It was the first q/q drop in three quarters after rising 2.2% in Q4. It made a negative contribution of 0.8 percentage point (revised down from an initial -0.7 point) to the first-quarter GDP.
Business investment slipped 1.2% (revised up from the initial reading of -1.4%) on quarter in Q1, the first q/q drop in two quarters after rising 4.3% in Q4. Its negative contribution was unrevised at -0.2 percentage point.
The slump in capex in the preliminary Q1 GDP data released last month was unexpected. Companies appear to be more cautious about the domestic and global outlook amid the slow COVID-19 vaccine rollout in Japan and surging infections to variants around the world.
Private-sector inventories made a positive contribution of 0.4 percentage point (revised up from +0.3 point) to Q1 GDP, the first q/q rise in three quarters (-0.5 point in Q4).
The government sector showed a larger-than expected upward revision. Public investment fell a revised 0.5% (initially -1.1%) on quarter in Q1 for the first q/q drop in seven quarters, after rising an upwardly revised 1.3% in Q4. It made a nearly flat (-0.0 percentage point) contribution to overall output in Q1, revised up from a negative 0.1 point.