Key facts
- Japan's Q1 GDP growth revised down to 1.8% annualised from 2.1%.
- Business capital expenditure decreased by 0.7% in Q1.
- Private consumption increased by 0.3% in Q1.
- External demand contributed 0.3 percentage points to Q1 GDP growth.
- Domestic demand contributed 0.2 percentage points to Q1 GDP growth.
- The government finalized a $19 billion supplementary budget to cushion rising energy costs.
Japan's economy expanded at a slower pace than initially reported in the first quarter, with revised data from the Cabinet Office showing an annualised growth rate of 1.8%. This figure is a downward revision from the preliminary estimate of 2.1%. On a non-annualised basis, GDP grew by 0.5%, matching the preliminary figure. Private consumption increased by 0.3%, consistent with the initial data. However, business capital expenditure contracted by 0.7%, a significant downward revision from the initial estimate of a 0.3% rise, and a key factor in the overall growth slowdown. External demand contributed 0.3 percentage points to GDP, unchanged from the preliminary assessment, while domestic demand added 0.2 percentage points, also matching the initial figure. The government has finalised a $19 billion supplementary budget to mitigate the impact of rising energy costs stemming from the Middle East conflict. Economists suggest the contraction in capital expenditure may be a temporary dip, with underlying trends in spending on labor-saving measures and AI remaining intact. However, persistent Middle East tensions and potential disruptions to oil flows could lead to stagnation or contraction in the third quarter if the Strait of Hormuz remains closed.