MNI: Japan Govt Aide: Private Consumption To Recover In Q2

The Japanese economy and private consumption will likely recover in or after the second quarter as temporary factors weighed them down over Q1, a senior official at the Cabinet Office said on Thursday, pointing to the suspension of automobile production and shipments in addition to the Hokuriku region earthquake.

"Private consumption is also weighed down by high prices,” the official told reporters.

However, the impact of wage hikes at major and smaller firms on households’ income will take hold moving forward, the official added. Private consumption was hit by high prices in the first quarter but consumer sentiment remained firm on the back of wage hike hopes, she said.

Japan's economy for the first quarter posted the first contraction in two quarters in the wake of weak private consumption and capital investment, preliminary GDP data released by the Cabinet Office Thursday showed.

The Q1 GDP fell 0.5% q/q, or an annualized -2.0% following a revised +0.0% q/q, or an annualized revised +0.0% for the fourth quarter of 2023.

Private consumption, which accounts for about 60% of Japan's GDP, fell 07% q/q in Q1 for the fourth straight drop, after a revised 0.4% fall in Q4.

Business investment fell 0.8% q/q in Q1 for the first drop in two quarters following a revised 1.8% rise in Q4. The median forecast was for a 0.2% rise.

When asked about the impact of the weak yen on the economy, the official noted it will put downward pressure on consumption and squeeze corporate profits if high import costs transfer to prices.

The year-on-year drop of inflation-adjusted real wages, a barometer of households' purchasing power, widened to 2.5% in March from a 1.8% drop in February, government data showed.

March’s real wages stayed in negative territory for the 24th straight month, marking the longest period and impeding spending by households that have been hit by high prices.