Real gross domestic product (GDP) contracted an annualised 0.7 percent between January and March, preliminary government data showed, much bigger than a median market forecast for a 0.2 percent drop.
It followed a revised 2.4 percent increase in the previous quarter.
On a quarter-on-quarter basis, the economy shrank 0.2 percent compared with market forecasts for a 0.1 percent contraction.
Private consumption, which accounts for more than half of Japan’s economic output, was flat in the first quarter, compared with market forecasts for a 0.1 percent gain.
Capital expenditure increased 1.4 percent compared with market forecasts for a 0.8 percent gain, the data showed.
External demand, or net exports, shaved 0.8 percentage point off GDP growth, the data showed.
Having exited a decade-long stimulus last year, the central Bank of Japan hiked rates to 0.5 percent in January and has signalled its readiness to keep raising borrowing costs if a moderate economic recovery keeps Japan on track to durably hit its 2 percent inflation target.
But fears of a Trump-induced global slowdown forced the central bank to sharply cut its growth forecasts at its April 30-May 1 policy meeting and cast doubt on its view that sustained wage hikes will underpin consumption and the broader economy. (Reuters)
