The world's fourth-largest economy is trying to negotiate relief from punishing US trade tariffs as it seeks to shake off stagnation that has long plagued the country.
It marked a slowdown from growth of 0.6 percent in October-December. The last time the Japanese economy shrank was in January-March 2024 -- when it contracted 0.4 percent.
On an annualised basis, GDP shrank 0.7 percent in the first quarter.
“Ucertainty is greatly heightened by the Trump tariffs, and it is likely that the economic slowdown trend will become clearer from (the second quarter) onward,“ said BNP Paribas chief economist Ryutaro Kono.
Katsutoshi Inadome of SuMi TRUST noted that “with recent negotiations between US and Chinese officials concluding with lower tariffs, we hope that this will ultimately mitigate their economic impact”.
But Japan's economic woes run deeper than the trade war.
“The possibility of the economy entering a recession cannot be ruled out, depending on the degree of downward pressure caused by the tariff issue,“ he warned ahead of Friday.
The BoJ said it now expects Japan's GDP to rise 0.5 percent in the fiscal year that started in April -- down from its previous estimate of 1.1 percent.
“With the economy already shrinking on the eve of the trade war, the Bank of Japan will probably wait even longer before resuming its tightening cycle than we had anticipated,“ Marcel Thieliant at Capital Economics said Friday.
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