Japan's Economy Contracts Amid Weak Consumption and Rising Costs

Revised data shows a smaller-than-expected GDP decline, but challenges persist with sluggish consumer spending and inflation pressures.

Japan's GDP shrank at an annual rate of 1.8% in Q1 2024, slightly better than the initial 2.0% estimate.
Private sector investments improved marginally, but personal consumption remained weak, marking a fourth consecutive quarterly decline.
Rising import costs due to a weaker yen have exacerbated inflation, impacting household spending and business confidence.
The Bank of Japan faces a complex policy environment, balancing the need to address inflation with sluggish domestic demand.
Japan's labor market remains tight, but demographic trends and a recent automotive scandal pose long-term risks to economic stability.