Japan's economy contracted for first time in two years in Q1 2018

Japan's economy contracted for first time in two years in Q1 2018

Also, the yen strengthened against other major currencies on safe-haven buying, clouding the prospects for Japanese exporters.

The GDP deflator fell 0.2% on year, defying forecasts for a gain of 0.3% following the flat reading in the previous three months.

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"Globally, IT-related items have been in an adjustment phase, which weighed down Japan's exports and factory output", said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

Economists say Japan's first-quarter contraction is temporary, but the rebound will not be almost as strong as previous quarters. "However, it is clear that in the long term the pace of growth is slowing".

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Domestic demand lopped 0.2 percentage points (ppts) of quarterly growth, driven lower by declines in housing investment and private business inventories.

Japan's economy contracted at an annualized rate of 0.6%, marking the end of eight consecutive quarters of economic expansion. The median estimate was for a 0.4 percent increase.

Japanese government data on preliminary GDP figures for the January-to-March period shows that the country's economy shrank for the first time in 9 quarters.

It was the first decline in nine quarters, snapping the longest stretch of continued expansion since the late 1980s.

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