Japan Economy To Shrink

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Japan Economy To Shrink

Japans Economy To Shrink By 1.5% In Q1 2024

Weak consumption continues to plague the Japanese economy, as evident from the forecast for Q1 2024. According to experts, a 1.5% contraction will be seen in the Japanese economy during Q1 2024 (Jan-Mar).

What's more troubling is that most of the key indicators for gauging growth also point to an uncertain outlook. So, it makes sense to think that the Bank of Japan will not even be thinking of raising the interest rates anytime soon.

Local Demand Remains Weak

The upcoming data, which is due in the next two days, will likely show a 0.4% decline, according to another group of economists.

This means that after posting growth during Q4 2023, Q1 2024 will shift to negative growth. The experts also added that all the major pillars of the GDP are also under pressure with little room for growth.

Similarly, an economist from the Norinchukin Research Institute added that the rising cost of living along with weak Yen translates into weak consumption. So, it makes sense to forecast that Q1 2024 will show an economic contraction of 1.2%.

In Japan, private consumption accounts for almost 50% of the economy, and even that is expected to contract by 0.2% during Q1 2024. But why? It appears that the consumers are getting ready to face the rising costs of living.

Capital expenditures are also expected to show a 0.7% contraction on a q/q basis as a lot of firms are hesitant to invest their profits into new equipment and plants.

look at net exports also shows that no breath of fresh air is expected from this segment of the economy. According to experts, it will also shave around 0.3% from the GDP growth.

CGPI, another important indicator for wholesale prices, is expected to rise by 0.3% m/m in April. In March, the reading of this indicator was 0.2%, which suggests another jump in inflation. However, this also means an increased cost of doing business and living in Japan.

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