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Japan's economic recovery will likely continue in Q2, despite the contraction in the first three months of the year on slower private consumption, a senior official at the Cabinet Office said Tuesday.

"Face-to-face services will continue to be restricted (by both the state of emergency and self-imposed restrictions) during Q2. But both exports and capital investment are expected to continue recovering," the official told reporters.

He added that transport equipment production will be weak due to the shortage of semi-conductors but will continue recovering on the whole.

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

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

The Q1 GDP was depressed by weaker private consumption, especially service spending, caused by the high rate of infections and a state of emergency, the official said, adding that economic activities are being restricted intentionally but the labor and income conditions continue recovering.

Japan's economy in fiscal 2020 fell at an annualized 4.6% for the biggest contraction since comparable data became available in 1995.

The average economist forecast for Q2 GDP growth is annualized at +1.84%, according to the latest monthly ESP Survey of 37 economists by the Japan Center
for Economic Research conducted from April 27 to May 10.