Japan's GDP Contracted After Consumers and Businesses Curb Spending

Akira Ito
16 May, 2024
Tokyo

Stocks and benchmark indexes in Toyo advanced following the market rally in overnight trading in New York. 

The weaker-than-anticipated U.S. core consumer price inflation in April of 3.4% raised hopes that the Federal Reserve may be able to cut interest rates at least twice in the second half of 2024. 

Investors also overlooked the weakness in economic growth in the first quarter, as the country suffered a devastating earthquake on the Noto Peninsula on the first day of 2024. 

The Japanese yen traded at 154.19 against the U.S. dollar after the release of the GDP data. 

 

Japan's GDP Contracted In the First Quarter  

Japan's economy shrank more than expected in the first quarter on the weakness in consumer spending and business investment, the Cabinet Office reported Thursday. 

GDP contracted 0.5% from the previous quarter in the first quarter of 2024, following a downwardly revised stagnation in the final quarter of 2023. 

Consumer spending fell at a faster pace of 0.7% in the fourth quarter compared to a decline of 0.4% in the fourth quarter because of weak wage growth and higher prices. 

Capital expenditure in the quarter fell 1.8%, largely impacted by the halting of production at Toyota's small car subsidiary, Daihatsu Motor. 

International trade also subtracted from economic growth after exports fell by 5.0%, faster than the 3.4% decline in imports. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average added 1.1% to 38,826.77, and the Topix index gained 0.1% to 2,733.94. 

Tech stocks led the gainers and tracked gains in overnight trading in New York. 

Tokyo Electron, Advantest, Screen Holdings, Lasertec, and SoftBank Group gained between 1.5% and 3.5%. 

Sumitomo Mitusi Financial and Mizuho Financial gained around 1%. 

Mitsubishi UFJ Financial decreased 4% to ¥1,523.50 despite the bank reporting better-than-expected net income and declaring a higher-than-expected dividend. 

Net income in the March quarter increased to 192.87 billion yen, and the company declared a cash dividend of 20.50 yen. 

Recruit Holdings increased 9% to ¥7,700.0 after the company reported better-than-expected quarterly results but also estimated improving market conditions. 

Revenue in the fiscal fourth quarter increased 1.9% to 843.7 billion yen from 827.7 billion yen, and net income rose to 34 billion yen from 22.3 billion yen from a year ago, respectively. 

Revenue in the staffing segment increased by 2.4% to 392.8 billion yen; in HR technology, it increased by 0.9% to 253.5 billion yen; and in matching and solutions, it increased by 2.5% to 2081. billion yen. 

HR technology segment includes U.S.-based Indeed and Glassdoor, and the company said revenue and job ads continue to decline on job sites by 10.1% in U.S. dollars. 

Nisshin Seifun dropped 9% to ¥1,868.50, and Nippon Paper Industries declined 8.5% to ¥1,011.0.