Investing.com-- The Japanese economy shrank more than initially expected in the first quarter, a government revision of gross domestic product data showed on Monday, indicating that the economy was much more fragile than initially expected.
GDP shrank 2.9% year-on-year in the January-March quarter, much more than an earlier estimate of 1.8%, the data showed. The revision was a rare, unexpected move by the Japanese government, and was made to reflect corrections made in construction orders data.
The contraction in Q1 GDP was driven primarily by worsening consumer spending, amid stagnant wages and sticky inflation. While this trend is expected to have improved in the second quarter, with an increase in wages, it remains to be seen just how much support the economy received.
The downward revision to growth is likely to be reflected in the Bank of Japan’s economic forecast for the year, and is also likely to delay any potential interest rate hikes by the central bank.
The Japanese yen weakened after Monday’s revision, with the USDJPY pair, which gauges the number of yen needed to buy one dollar, up 0.1% at 160.99. The yen was at its weakest level since 1986.
The prospect of a less hawkish BOJ, however, buoyed Japanese stocks, with the Nikkei 225 index adding 0.9%.