Japan's revised GDP contraction narrows to 0.2%, and the central bank's “wait-and-see” model is expected to continue

The Zhitong Finance App learned that due to improvements in inventory and consumption data, the Japanese economy contracted less than initially estimated in the first quarter of this year, but this result still highlights the need for the Bank of Japan to be cautious when weighing policy paths amid high uncertainty.

According to data released by Japan's Cabinet Office on Monday, in the three months up to March, Japan's real gross domestic product (GDP) shrank by 0.2% at an annual rate, better than the 0.7% decline shown in the initial value, and exceeded economists' previous expectations of maintaining the initial value.

Specifically, personal consumption increased slightly by 0.1% month-on-month, and enterprise equipment investment increased by 1.1%. Inventory changes contributed 0.6 percentage points to GDP growth, while net exports dragged down economic growth by 0.8 percentage points.

Revised data shows that the fourth largest economy in the world contracted even before US President Trump's April tariff expansion brought additional pressure on the economy. For the Bank of Japan, this set of data may still support a wait-and-see approach at this stage, especially after the last policy meeting lowered its growth forecast for this year.

Bank of Japan officials remain highly alert to the impact of tariffs. Governor Ueda Kazuo called the current economic uncertainty “extremely high.” He warned last week that tariffs could have an impact on the Japanese economy through multiple channels, and promised to evaluate economic and price trends through a wide range of indicators.

Most economists expect the Bank of Japan to postpone further interest rate adjustments, and most of them believe that the policy will not change in the next few months. The Bank of Japan's next policy meeting will be held on June 17.

Currently, Japan is facing the impact of a series of US tariff measures, including imposing a comprehensive 10% tariff on its goods (if no trade agreement is reached, the tax rate will rise to 24% in early July). The impact of industry-specific tariffs is particularly significant, particularly the 25% tariff on automobiles and parts, which continues to erode the profit margins of exporting companies.