GDP marks first contraction in 9 quarters

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This brought to an end a series of eight consecutive quarters of growth, a winning streak not seen since the heady days of the "miracle" boom of the 1980s when the Japanese economy ruled the world.

Japan's economy shrank for the first time in two years in the first quarter of the year amid weak consumption, official data showed today.

Also, the yen strengthened against other major currencies on safe-haven buying, clouding the prospects for Japanese exporters.

"The economy is unlikely to continue to contract further. [Japan's] GDP will likely come back to positive growth in April-June", Minami said.

Private consumption was flat after an improvement of 0.2% in the final quarter of a year ago.

Japan's longest straight period of expansion in almost three decades ended in the first quarter of this year as the economy shrank at an annualized rate of 0.6 percent.

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Exports rose 0.6 percent.

Our assessment of the factors seemingly behind the negative growth is that the deterioration in consumer spending is likely due to curbed spending owing to poor weather conditions in Japan, such as heavy snowfall, and the slowdown in exports likely reflects a temporary slowdown in overseas economies.

Other pundits mentioned special factors that impacted growth in the first quarter.

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

Economists don't expect the period of contraction to last long. The median estimate was for consumer spending to remain unchanged.

Stock market traders appeared to be disappointed by the data, however, with the main Nikkei stock index closing down 0.44 per cent.