Japan’s economy contracted in the first quarter of the year by less than initially estimated on better inventory and consumption figures, while still backing caution by the Bank of Japan (BOJ) as it weighs its policy path amid heightened uncertainty.

Gross domestic product shrank at an annualised pace of 0.2 per cent in the three months through March, the Cabinet Office said on Monday, compared with a 0.7 per cent retreat in preliminary data. Economists had expected that initial figure to stand.

Personal consumption rose 0.1 per cent, while business spending gained 1.1 per cent. Inventories contributed 0.6 percentage points to growth, while net exports posted a drag of 0.8 percentage points.

The revised figures confirmed that the world’s fourth-largest economy contracted even before US President Donald Trump added to the headwinds facing the economy by expanding his tariff measures in April. For the BOJ, the data are still likely to support a wait-and-see approach for now, particularly after it slashed its growth forecast for this year at the last policy meeting.
People cross a street in Tokyo’s Shinjuku business and shopping district. Japan’s economy recorded its first economic contraction in four quarters. Photo: EPA-EFE

People cross a street in Tokyo’s Shinjuku business and shopping district. Japan’s economy recorded its first economic contraction in four quarters. Photo: EPA-EFE

BOJ officials were very cautious about the impact of tariffs, which Governor Kazuo Ueda described as having “extremely high” uncertainties. He warned last week that tariffs could affect Japan’s economy through multiple channels, pledging to evaluate economic and price developments through a broad array of indicators.