Japan’s economy contracts as energy prices soar

TOKYO — Japan’s financial system shrank at a worse than anticipated annual price of 1% within the first quarter, as rising costs and COVID-19 restrictions sapped spending and funding, in accordance with information launched Wednesday.

Japan’s actual gross home product, or GDP, the sum of the worth of a nation’s services, contracted 0.2% in January-March in comparison with the earlier quarter, the Cupboard Workplace mentioned.

The world’s third-largest financial system managed modest development within the remaining quarter of final 12 months, however the financial system sank the quarter earlier than that.

Russia’s conflict in Ukraine has pushed already excessive vitality costs nonetheless larger, a giant minus for resource-poor Japan. The Japanese yen has weakened, buying and selling at about 130 yen to the greenback, making imports comparatively costlier.

Japan by no means had a lockdown however has periodically put restrictions on companies, principally asking eating places and bars to shut early to curb the unfold of the coronavirus pandemic. The final such restrictions led to March.

Some medical consultants say the nation has seen a surge in COVID-19 instances since then, due to the extra contagious omicron variant. Japan has recorded about 30,000 COVID-19-related deaths to this point.

The reintroduction of restrictions to curb the unfold of the infections and the influence of inflation placing a squeeze on family spending energy are pulling development downward, analysts say.

However some count on an financial rebound in months forward.

“After a dismal begin to the 12 months, we predict the financial system will bounce again this quarter because of a restoration in shopper spending, significantly in providers, following the total lifting of COVID-19 restrictions in Japan,” mentioned Takayuki Toji, an economist at SuMi TRUST.

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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama