Japan Q1 GDP marks 2nd straight quarter of contraction

Ross J Burland FXStreet

Reuters reported that "Japan's economy contracted at an annualised rate of 3.4% in January-March, government data showed on Monday, marking the second straight quarter of contraction and meeting the technical definition of recession, due to the coronavirus pandemic."

It marked the first recession since the second half of 2015.

The preliminary reading for first-quarter gross domestic product (GDP) compared with economists' median estimate of a 4.6% decline in a Reuters poll, the Cabinet Office data showed.

It followed a revised 7.3% contraction in October-December.

On a quarter-on-quarter basis, GDP shrank 0.9 in January-March, compared with the median forecast for a 1.2% decline, the data showed.

Private consumption, which makes up more than half of the economy, fell 0.7%, while capital spending dropped 0.5% and exports slid 6.0%, it showed.

Key notes

Japan Jan-Mar real GDP -0.9% qtr/qtr (reuters poll: -1.2%).
Jan-Mar annualised GDP -3.4% (poll: -4.6%).
Jan-Mar private consumption -0.7% qtr/qtr (poll: -1.6%).
Jan-Mar capex -0.5% QoQ (poll: -1.5%).
Jan-Mar external demand contribution to GDP -0.2 pct point (poll: 0.0 pct pt)
Jan-Mar exports -6.0% QoQ.
Jan-Mar domestic demand contribution to GDP -0.7 pct point.
Jan-Mar GDP deflator +0.9% YoY.

Market implications

Japan is in a technical recession, (two consecutive quarters of negative economic growth), well telegraphed and markets are taking it in their stride today. USD/JPY is higher by just 0.15% on the day so far and has rallied by 10 pips on the news.

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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