Japan's economy shrinks 0.7% in the January-March period

Japan's economy shrank an annualised real 0.7 per cent in the January-March period, marking the first contraction in four quarters, as consumer spending remained weak due to inflation and increased imports weighed on growth, government data showed.

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In the first quarter of 2025, real gross domestic product, adjusted for inflation, declined 0.2 per cent from the October-December period, the Cabinet Office said.

Exports fell 0.6 per cent, marking the first decline in four quarters, weighed down by a decline in charges for the use of intellectual property rights, and research and development services.

Meanwhile, imports, whose growth impacts GDP negatively, expanded 2.9 per cent, driven by aircraft and payments for online advertising.

On quarter, private consumption, which accounts for more than half of the economy, rose for the fourth consecutive quarter, inching up 0.04 per cent as inflation continued to outpace wage hikes.

Meanwhile Japan's household spending in fiscal 2024 dropped a real 0.1 per cent from a year earlier, falling for the second consecutive year, as consumers reduced food expenditure amid rising prices, government data showed recently.

Households of two or more people spent an average of 304,178 yen ($2,100) per month in the fiscal year ended March, according to the data, a key indicator of private consumption that accounts for more than half of Japan's gross domestic product.