The Japanese economy fell by 1.7% quarter over quarter or 6.8% annualized. However, this big plunge was totally expected: Japan raised the sales tax in April from 5% to 8%. In anticipation to this hike, consumers were active in Q1, and the economy jumped by 1.6%. So now comes the payback.
In addition, there is an interesting silver lining: the GDP Price Index rose by 2% year over year, more than 1.7% expected. This reflects rising prices – the goal of the Bank of Japan.
Other details aren’t that positive: imports fell 20.5% (annualized) and exports 1.8%. Private consumption dropped at a pace of 19.2% and investment by 9.7%. After two distinct quarters so far in 2014, expectations are for a rebound in Q2. However, production remains weak and real incomes are low and could hold the economy back.
USD/JPY remained stable after the publication and remained very close to the 102 magnet.
You can listen to a full analysis of the Japanese economy in our latest podcast:
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