TOKYO -- A sharp drop in exports to China reduced Japan's economic growth to a crawl in the January-March period, a survey of private-sector economists suggests.
Real gross domestic product likely grew just 0.003% from the previous quarter on an annualized basis, based on the average response from 15 economists. Exports are estimated to have declined by 1.5% and capital spending by 1.8%. Private consumption, which had propped up the economy in the past, also fell.
"In addition to exports declining because of China's economic slowdown, a trend in postponing capital investments, especially in the manufacturing sector, has emerged on uncertainty over the global economy," said Hideki Matsumura of the Japan Research Institute.
The government will release preliminary quarterly GDP numbers on May 20.
The Japanese economy contracted in the July-September quarter last year on a series of natural disasters. The quarter ended December saw a drop in exports as the result of a soft Chinese economy, but strong consumer spending kept growth in positive territory.
Now economists on average predict that consumption shrank 0.09% in the first quarter. The past winter was warm and had less snow than usual, so demand for cold-weather apparel and heating products was sluggish.
"Price hikes on food that began in March led to weaker consumer sentiment," said Yusuke Kaniwa, senior analyst at the Hamagin Research Institute.
Weak consumer spending also dented imports.
The economists surveyed said imports decreased about 3%, greater than the fall in exports, thereby improving Japan's net export position. This should support the economy's growth rate but also reflects weak domestic demand.
"It is definitely not a desirable situation," said Yoshiki Shinke, chief economist at the Dai-ichi Life Research Institute. "The underlying facts are worse than just the numbers."
On the other hand, the economists on average see GDP growing 1.1% in the current quarter ending June. "Due to the big boost in public works spending in the supplementary budget, coupled with the mood surrounding the transition to the new [Reiwa] era, consumer sentiment is expected to improve," said Atsushi Takeda, chief economist at the Itochu Research Institute.
Consumer spending on appliances and other durable goods is anticipated to swell ahead of October's hike in the consumption tax to 10% from 8%.
But risks remain. The U.S. is moving ahead on plans to increase tariffs on $200 billion in Chinese imports Friday, clouding the likelihood of the Sino-American trade war ending soon.
A hike would affect Japanese exporters of components and materials to Chinese production hubs for U.S.-bound products. "Exports to China are pivotal for many manufacturers, and [raising tariffs] will add downward pressure on the economy," said Takeshi Minami, chief economist at the Norinchukin Research Institute.
The Cabinet Office will likely rate business conditions as "worsening" when it releases next Monday a monthly score based on multiple indicators. The government separately publishes the Monthly Economic Report, which spells out the official appraisal of the economy. If first-quarter GDP adds to economic concerns, it could reignite calls to delay the consumption tax hike.
