Japan's Economy Contracts 0.9% in Q4

Japan's real GDP for the first quarter of 2011 fell 0.9% from the previous quarter, tipping the country into a recession as the March 11 earthquake and tsunami caused declines in consumer spending, business investment and private-sector inventories.
TradingEconomics.com, WSJ 5/19/2011 2:04:03 PM

During January-March, weakened domestic demand shaved 0.8 percentage point off Japan's quarterly growth, the GDP data showed. Consumer spending dropped 0.6% on quarter, and business investment also fell 0.9% on quarter.

A government official said falls in spending on cars and services in the quarter, contributed to the decline in consumption for the period.

Sentiment among Japanese consumers also plunged in the aftermath of the disaster, leading to less spending on luxury items and travel.

Japan's latest downturn has pressured the country's authorities into boosting government spending and taking more monetary policy steps. A ¥4 trillion yen extra budget to finance initial reconstruction efforts was enacted earlier this month.

Government spending rose 1.0% in January-March amid disaster-relief efforts, its strongest gain in three quarters, but was not enough to offset weakness in private sector demand.

Exports, meanwhile, rose 0.7% for the first gain in two quarters, the data showed, confounding expectations for a on-quarter decrease. Imports increased 2%, growing for the first time in two quarters amid high global oil prices.