The Japanese government raised its forecast for gross domestic product (GDP) in the first quarter, stating that GDP shrank by 0.5% year-on-year. Consumer spending continues to recover, even as Japan faces a new round of the COVID-19 outbreak.
On a quarterly basis, Japan’s Q1 GDP contracted 0.1%, better than preliminary estimates of a 0.2% contraction.
Investors are still watching whether the slump in the yen will affect the Japanese economy as a whole. The yen has fallen to its lowest level against the dollar in 20 years. This is due to the forecast that the U.S. Federal Reserve (Fed) will accelerate its rate hikes to curb inflation. This is in contrast to the Bank of Japan (BOJ), which continues to pursue a policy of monetary easing that has widened the interest rate differential between the U.S. and Japan.