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Japan Slumps Back into Decline as COVID19 Hits Spending

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TOKYO Japan39;s economy shrank more than expected in the first quarter as the slow vaccine rollout and a resurgence in COVID19 infections hit consumption, reinforcing expectations the country will lag major trading partners in emerging from the pandemic.

Extended state of emergency curbs are likely to keep any recovery in the current quarter modest, analysts say, adding to challenges for policymakers seeking to pull Japan out of the doldrums.

With the medical situation still worsening and the vaccine rollout too slow, it will take until the end of the year for output to return to previrus levels, said Marcel Thieliant, senior Japan economist at Capital Economics.

The world39;s thirdlargest economy shrank an annualised 5.1 per cent in the first quarter, more than a median market forecast for a 4.6 per cent contraction and following an 11.6 per cent jump in the previous quarter, government data showed on Tuesday.

The decline was mainly due to a 1.4 per cent drop in private consumption as state of emergency curbs to combat the pandemic hit spending for clothing and dineouts, the data showed.

But the biggerthanexpected contraction also reflected a surprise 1.4 per cent drop in capital expenditure, which confounded market expectations for a 1.1 per cent increase as companies scaled back spending on equipment for machinery and cars.

While exports grew 2.3 per cent thanks to a rebound in global demand for cars and electronics, the pace of increase slowed sharply from the…

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