TOKYO – Japan’s economy expanded an annualized real 1.8 percent in the January-March quarter, revised down from an initially reported increase of 2.1 percent as capital investment slowed, government data showed Monday.
It marked the second consecutive quarter of growth, but many economists believe the prolonged Iran war will likely weigh on the Japanese economy in the April-June quarter by fueling inflation, weakening private spending and disrupting supplies of petroleum products.
Real gross domestic product, adjusted for inflation, grew 0.45 percent from the October-December period, down from a preliminary reading of 0.51 percent, a Cabinet Office official said.
GDP is the total value of goods and services produced in a country.
In the latest GDP data, capital spending fell 0.7 percent in the three months through March, revised down from a 0.3 percent increase, as investment in software and production machinery was weak.
A Cabinet Office official said the downward revision reflects separate government data on business investment by Japanese companies in the quarter, adding the impact of the Middle East conflict on the data was unclear.
Public investment was upgraded to a 1.5 percent rise from a 1.4 percent increase.
Private consumption, which accounts for more than half of GDP, grew 0.35 percent in the quarter, revised up from the preliminary 0.27 percent, helped by robust outlays for dining and spending on games, the official said.
Housing investment was revised upward to a 0.9 percent rise from the 0.5 percent increase reported earlier.
Exports rose 1.8 percent from the previous quarter, revised up from a 1.7 percent climb, supported by a recovery in auto shipments bound for the U.S. market. Imports were downgraded to a 0.4 percent increase from a 0.5 percent rise.
GDP was pressured 0.1 percentage point by a reduction in private inventories, apparently due to the government’s decision to release oil from stockpiles, starting with those held by the private sector.
“Growth in the April-June quarter is forecast to hover around zero,” said Yoshiki Shinke, senior executive economist at Daiichi Life Research Institute Co., noting the biggest concern is the adverse impact of supply uncertainty and procurement difficulties amid tensions in the Middle East.
The conflict has disrupted the supply of oil and petroleum products to the resource-poor country amid the effective closure of the Strait of Hormuz after the United States and Israel launched attacks on Iran on Feb. 28.
Prolonged tensions could hit Japan’s exports bound for the Middle East, while concerns are heightening that elevated crude oil prices would drive up inflation.
To brace for the impact of rising energy costs, Japan’s parliament on Friday enacted a 3.11 trillion yen ($19 billion) supplementary budget for this fiscal year that marks the government’s first fiscal spending package in response to the Middle East crisis.
Nominal GDP expanded at an annualized rate of 2.5 percent, revised down from a 3.4 percent gain reported earlier.