The Japanese economy is expected to have contracted at a slightly slower pace than initially reported for the January-March period, thanks to upgrades in capital spending figures, according to a Reuters poll on Friday. Despite this slight improvement, risks continue to loom over the economic outlook.

Economists anticipate a return to growth this quarter, driven by tax cuts and wage increases. However, higher import costs due to a weaker yen are expected to dampen consumption, and disruptions in some automakers could also have a negative impact.

Data from the Cabinet Office, set to be released on Monday, is projected to show a 1.9% annualized contraction in gross domestic product (GDP) for the first quarter, an improvement from the initially reported 2.0% contraction.

The revised figures would still indicate a quarter-on-quarter contraction of 0.5%, consistent with the initial estimate.

The anticipated GDP revision is largely attributed to a smaller decline in capital expenditure, a key indicator of private demand. Capital expenditure is expected to have fallen 0.7% in the first quarter, an improvement from the 0.8% decline initially estimated.

Preliminary data indicated that private consumption, which constitutes more than half of the Japanese economy, decreased by 0.7% in the first quarter. This decline was driven by rising living costs, exacerbated by the weak yen, which squeezed household finances.

External demand, calculated as exports minus imports, reduced overall GDP figures by 0.3 percentage points.

Additionally, the Bank of Japan (BOJ) is expected to release data on June 12 showing that the corporate goods price index, which tracks the prices of goods exchanged between companies, likely increased by 2.0% year-on-year and 0.4% month-on-month in May.

Paraphrasing text from "Reuters" all rights reserved by the original author.