In the first quarter of the year, the Japanese economy contracted at an annual rate of 2%, with a decline in consumption and exports contributing to the decrease. Despite relatively low unemployment around 2.6%, slow wage growth and rising prices have been challenges, partly due to the weakness of the yen against the U.S. dollar.
Despite these challenges, there is optimism that production and sales will bounce back later in the year. The government’s recent order for Daihatsu Motor Co. to halt production due to safety test scandals also affected overall growth, but it is expected that this will be resolved soon and not impact future performance as much as it did in this period.
The latest data presents a challenge for policymakers, who are expected to consider raising interest rates further, possibly in July. The central bank raised rates earlier in the year to a range of zero to 0.1% from minus 0.1%. Analysts like Robert Carnell from ING noted that there has been a gradual normalization in activity since March, suggesting a potential recovery in the coming months
