Japan’s economy shrank in the first three months of this year as a soaring import bill and the hit from the omicron variant pushed its pandemic recovery into reverse, offering some support for the Bank of Japan’s view that stimulus should continue for now.
Gross domestic product contracted at an annualized pace of 1% in the quarter through March, the Cabinet Office reported Wednesday. Economists had expected a decline of 1.8%.
The setback to Japan’s already sluggish recovery from the pandemic stemmed from a deterioration in overall trade as import prices surged, exacerbated by the war in Ukraine and a deterioration of the yen to two-decade lows. The monthly trade balance has been in the red since August after supply chain snarls and returning global demand started pushing up commodity prices.