Japanese GNP Declined 0.5% In First Quarter --- Contraction, at Annual Pace Of 2.1%, Raises Pressure For Cut in Discount Rate
TOKYO -- Japan's economic output declined in the first quarter -- the first contraction in 11 years -- increasing pressure on the central bank to again reduce the discount rate.</br></br>The Economic Planning Agency said gross national product, the nation's output of goods and services, contracted an inflation-adjusted 0.5% in the first quarter from the prior three months, or at a 2.1% annual rate. The last previous Japanese GNP decline was in 1975's first quarter, when rising oil prices caused a 0.8% contraction.</br></br>In the most-recent Japanese fiscal year, which ended March 31, the economy grew 4.2%. But officials attributed the growth to the economy's performance in the first three fiscal quarters.</br></br>Economists attributed the calendar first quarter's contraction, which was slightly larger than most of them had expected, primarily to the strong yen. The Japanese currency has risen 43.5% against the U.S. dollar since last September, when the U.S. and the four other largest industrial democracies launched an effort to lower the American currency's value in order to narrow the U.S. trade deficit.</br></br>The strong yen, which makes Japanese products more expensive overseas, has cut into Japanese exports, which fell 4.9% in the first quarter from 1985's fourth period.