Japanese economy likely contracted in Q1 2016

The available economic indicators for Japan for the month of February do not show a considerable rebound in economic activity in the first quarter of 2016, after the economy contracted in Q4 2015. The Japanese economy is expected to have shrunk in Q1 2016, according to BNP Paribas. Admittedly, Japanese exports and manufacturing sector continue to be negatively impacted by sluggish growth in emerging economies, particularly China. Exports shrank over 2% in February after stagnating in the previous month. Japan’s industrial production declined sharply 6.2% in February.

Moreover, the Bank of Japan short-term survey, Tankan, does not show any rebound in the second quarter, noted BNP Paribas. The expectation index further dropped below zero to negative territory, first time in ten quarters.

Moreover, household consumption has hardly contributed to the economic growth in the first quarter, said BNP Paribas. Retail sales in February shrank over 2% m/m, in spite of full employment. The jobless rate grew slightly to 3.3% in February from January’s 3.2%. Furthermore, the ratio of job offers to demand also remained unchanged at 1.28 in February, hinting at scarcity of labor force. However, wages have not risen, depressing consumer confidence, added BNP Paribas. Sentiment fell to the lowest level in over one year in February.