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Japan's economy has the potential for a forceful recovery as exports continue to be strong and capital investment remains solid, Economy Minister Yasutoshi Nishimura said on Tuesday.

Nishimura, however, said that the government must carefully pay attention to the impact of the state of emergency until the end of May on economic activity and sentiment.

He also said the economic contraction in the first quarter was mainly due to weaker private consumption, mainly weak service spending, on the back of the second state of emergency for the period between Jan. 8 and March 21.

Nishimura, however, added that demand for goods remains solid and the drop in private consumption (-1.4% q/q) in the first quarter wasn't as big as the -8.3% q/q fall in the second quarter of 2020 caused by the first state of emergency.

Japan's economy posted the first contraction in three quarters for the January-March period in the wake of weaker private consumption and slowing capital investment, according to preliminary GDP data released on Tuesday by the Cabinet Office.

Q1 GDP fell 1.3% q/q, or an annualized -5.1% following an unrevised 2.8% q/q, or an annualized revised 11.6% for the fourth quarter of 2020.

The Q1 contraction was largely in line with the MNI median forecast that pointed to a fall of 1.3% q/q, or an annualized -5.0%.