Japan's Economy Contracts 0.9% in Q1 on Quake Impact

Japan's economy shrank 0.9 percent in the January-March quarter, marking the second consecutive quarter of contraction, preliminary data from the Cabinet Office showed Thursday.

The first quarter figure translates into an annualized contraction of 3.7 percent, with the result coming in far worse than median economists' forecasts for the economy to shrink by 0.5 percent.

Private consumption, which accounts for around 60 percent of Japan's economy fell by 0.6 percent, due to consumers being frugal in the days and weeks following the March 11 earthquake, tsunami and subsequent nuclear disaster.

Japan's net exports, were responsible for pushing down GDP by 2. 0 percentage points, due to damaged factories, infrastructure and disrupted supply chains making it almost impossible for some manufacturers to ship their products to foreign markets.

The Fukushima nuclear crisis also affected trade, the second biggest component of the world's third largest economy, as some countries halted shipments of certain Japanese goods, due to radioactive contamination.

Not only were Japan's exports severely hamstrung following the massive quake and tsunami, rising commodity prices pushed up the price of imports and hence Japan's trade balance plunged by 34.3 percent in March compared with the same month a year ago.

Previous figures from the government showed that in 2009 exports and imports comprised 13.5 percent and 12.7 percent of GDP respectively.

The consensus among leading economists is that Japan's economy will likely contract for a third straight quarter in April-June on quake-related issues, but will likely see growth later in the year as reconstruction efforts and state restoration projects swing into full gear.