Japan's economy shrinks in Q1, ends 2-year run of growth

Japan's economy shrinks in Q1, ends 2-year run of growth

Cabinet Office data due on Wednesday is expected to show Japan's economy contracted at an annualized rate of 0.2 percent in January-March from the previous quarter, slowing sharply from 1.6 percent annual growth seen in October-December 2017.

Japan's economy relies on exports of electronics, among other products.

As of 9:15 a.m. local time, the 225-issue Nikkei Stock Average dropped 47.21 points, or 0.21 percent, from Tuesday to 22,770.81.

The contraction, which was driven by a decline in investment and consumption and weaker exports, comes as Japan Inc worries about the possible effect of U.S. President Donald Trump's protectionist policies on global trade.

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

The economists polled by Reuters were expecting a 0.2 percent contraction following a downwardly revised 0.6 percent annualized rate of expansion in the fourth quarter.

According to the Japanese government, real GDP fell by 0.2% in the three months to March, undershooting expectations for an unchanged reading for the quarter.

Private consumption, which makes up about 60 percent of the economy, probably stood flat after a 0.5 percent gain in the fourth quarter.

"The economy is unlikely to continue to contract further".

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