The annualized 0.6 percent fall in Japan's gross domestic product for the January-March period — the first decline after eight consecutive quarters of growth — may just be a temporary dip in an economy deemed to be in the middle of the second-longest boom cycle in the nation's postwar history. But the GDP data released this week by the Cabinet Office also underlines the fragility of the extended recovery that relies heavily on overseas demand in the absence of a robust, domestic demand-driven engine of growth. Given the uncertainties that hang over the course of the global economy, the government needs to try all the harder to press ahead with structural reforms to create new homegrown avenues of growth.
Both pillars of domestic demand stagnated: Consumer spending fell 0.001 percent, compared with a 0.2 percent gain in the previous quarter, due to declines in smartphone sales and a spike in vegetable prices due to bad winter weather that dampened consumption. Capital investments by businesses dropped 0.1 percent for the first decline in six quarters — defying market forecasts that business investments remain steady. Housing investments also fell 2.1 percent.
Exports, whose robust increases have driven the economy's growth so far, rose 0.6 percent for the third quarterly increase in a row, but the expansion lost steam from the 2.2 percent rise in the October-December period, due to a slowdown in smartphone-related shipments to Asian markets.