Japan's economy contracted at an annualized rate of 2.9% in the first quarter of 2024, according to revised data from the Japanese government [7fcea16b]. This figure is significantly worse than the initial estimate of a 1.8% contraction [869f8539]. The downward revision was prompted by corrected data for construction orders, which revealed a weaker economy than previously thought. The revised GDP figure also indicates a 1.9% shrinkage in public investment and a revision of housing investment to minus 2.9% [7fcea16b]. Additionally, private consumption has contracted for the fourth consecutive quarter, further contributing to the economic decline [7fcea16b].
The weak GDP figures add to the challenges faced by Prime Minister Fumio Kishida and his government, as Japan continues to battle stagnant growth, deflation, and an aging population [74df8beb]. The decline in consumer spending is a significant factor contributing to the contraction in Japan's economy. Weak household spending has been a persistent challenge for policymakers, with Japanese real wages shrinking for two consecutive years. The rising cost of living has outpaced nominal wages, making it difficult to achieve sustained economic growth [b23742aa].
However, government officials remain optimistic that wage hikes and recent tax cuts will stimulate spending and help revive the economy [7fcea16b]. Despite the downward revision in Q1 GDP, there are expectations of an economic rebound in the second quarter as auto output recovers and wage hikes lift consumer sentiment [b23742aa]. The Bank of Japan is expected to raise interest rates later this year, but policymakers will need to address the challenges of declining consumer spending and other economic headwinds to achieve sustained economic growth [b23742aa].
The weak economic performance in the first quarter of 2024 has raised concerns about Japan's position in the global economy. According to the International Monetary Fund (IMF), Japan's GDP is expected to slip to the fifth position in magnitude after the United States, China, Germany, and India next year [869f8539].
In other news, a magnitude 6.0 earthquake hit the Noto Peninsula in central Japan. Toyota and Mazda halted production of 5 models due to a certification scandal. Cases of a 'flesh-eating' bacterium reached a record high in Japan. Over 30 people were sent to the hospital due to pepper spray use at Tokyo Korean School. A doctor at the scene of the Akihabara mass killing recalls the pain of lives lost [1a344375].