TOKYO (Reuters) -- Japan's economy shrank slightly less than initially reported in the first quarter as private consumption remained resilient in the face of resurgent COVID-19 infections, offsetting a drop in capital spending.
The slower contraction is welcome news for policymakers worried about the world's third-largest economy's recovery this quarter amid pressures from higher energy and raw material prices, a weak yen and persistent supply disruptions.
Revised gross domestic product (GDP) data released by the Cabinet Office on Wednesday showed Japan's economy shrank an annualized 0.5% from January to March. That was a smaller drop than the preliminary reading of a 1.0% fall released last month.
On a quarter-on-quarter basis, GDP lost 0.1%, beating the median market expectations for a 0.3% drop.
Private consumption, which makes up more than half of Japan's GDP, increased 0.1% in the first quarter from the previous three months, revised up from an initially estimated flat reading. That helped offset a 0.7% fall in capital spending.
Domestic demand as a whole contributed 0.3 of a percentage point to revised GDP figures, while net exports took off 0.4 of a percentage point.
The GDP upgrade follows data on Tuesday showing household spending posted a larger-than-expected decline in April as the yen's sharp decline and surging commodity prices pushed up retail costs.
Economists polled by Reuters last month forecast strong annualized growth of 4.5% this quarter. A majority of respondents said they expected growth will be strong enough for the economy to recover to pre-pandemic levels.