• Kyodo

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The economy is continuing to “recover at a moderate pace” thanks to a pickup in domestic and overseas demand, the government said Wednesday, highlighting underlying solidity despite a contraction in its gross domestic product in the January-March quarter.

The government left its headline assessment of the economy unchanged for the fifth straight month, maintaining its evaluation of all key components including private consumption, capital expenditure and exports.

Private consumption, which accounts for about 60 percent of gross domestic product, as well as exports are “picking up,” while business investment and industrial production are “increasing moderately,” the Cabinet Office said in its monthly economic report.

National GDP shrank 0.6 percent in the first quarter of 2018 in annualized real terms, marking the first contraction of the world’s third-largest economy in more than two years and breaking its longest growth streak since the late 1980s.

But a Cabinet Office official said the downturn was caused by one-time factors such as a spike in vegetable prices, which weighed on consumer sentiment, and a dip in demand for smartphones, adding that conditions are expected to improve.

Regarding inflation, the report said “consumer prices are rising moderately in recent months,” maintaining the same language since March.

The report also cautioned that economic uncertainty overseas and fluctuations in financial markets warranted attention.

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