TOKYO – The Japanese economy deteriorated in March, according to a composite index of business conditions released by the government on Monday, recording the first worsening in more than six years.
The assessment is based on a series of important indicators such as industrial production and demand in the key export sectors of the world’s third biggest economy, which have faced sustained falls in the last few months.
According to a report released by the Cabinet Office, its composite index of business conditions for March fell 0.9 points from the previous month to 99.6 against the 2015 base of 100, a performance described by the office as a “worsening” of the economy,
This is the first time this term has been used by the Cabinet Office since January 2013, after earlier warning during the second half of 2018 that the economy was weakening and then changing its assessment to “signaling a possible turning point” for the period between January and March.
The bad news adds to existing fears about a possible contraction of the Japanese economy after a long cycle of expansion, and comes at a delicate time for the markets due to the potential impacts of the slowdown in the Chinese economy and the trade war between Washington and Beijing.
Japan ended 2018 with GDP growth of 0.7 percent, the seventh straight year when its GDP grew, although sectors of key importance such as exports and domestic consumption have showed signs of weakening in recent months.
A decline in GDP could affect Prime Minister Shinzo Abe’s plan to raise the consumption tax from 8 percent to 10 percent from October, due to the measure’s possible impact on household spending.
The government is set to release first quarter GDP data on May 20, while it will also release its monthly economic report by the end of the month, which will contain a fresh evaluation of the current situation.
The Bank of Japan predicted 0.9 percent growth for the Japanese economy in 2019, while the International Monetary Fund decided to scale its growth estimate down to 1 percent for the Japanese economy this year.