GDP marks first contraction in 9 quarters

Sumitomo Mitsui's Kichikawa Sees Japan Economy Growing in Q2

TOKYO, May 16 (Reuters) - Japan's economy contracted more than expected at the start of this year, breaking the longest run of growth seen for decades, in a blow to Prime Minister Shinzo Abe's reflationary "Abenomics" polices.

Compared to the previous quarter, gross domestic product (GDP) fell 0.2 percent, more than the median estimate for GDP to be flat, and following a downwardly revised 0.1 percent quarter-on-quarter expansion in October-December, Cabinet Office data showed on Wednesday.

Japan's longest straight period of expansion in almost three decades ended in the first quarter of this year as the economy shrank at an annualized rate of 0.6 percent.

Private consumption was flat on a quarterly basis, in line with expectations after adding 0.2% in the three months prior. "Real private-sector final consumption was down slightly (-0.0% q-q) and real exports slowed from +2.2% q-q in 2017 Q4 to +0.6% in 2018 Q1".

"If you look at the Bank of Japan's "Tankan" survey released in April, business confidence was unshaken, with corporate investment plans remaining solid", he said.

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The limp first-quarter performance was spread across different areas of the economy, according to Marcel Thieliant, senior Japan economist at research firm Capital Economics.

Katsunori Kitakura, lead strategist at Sumitomo Mitsui Trust Group, also believed the disappointing first quarter figure was "a one-off event, as weak personal consumption coincided with other special factors".

Economists don't expect the period of contraction to last long.

Stock market traders appeared to be disappointed by the data, however, with the main Nikkei stock index closing down 0.44 per cent.

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