Japan's Economy Declines as Energy Prices Increases

According to data released on Wednesday, Japan's economy shrunk at a faster-than-expected annual rate of 1% in the first quarter, as rising prices and COVID-19 restrictions stifled consumption and investment. According to the Cabinet Office, Japan's real gross domestic product, or GDP, contracted 0.2 percent in January-March compared to the previous quarter.

GDP is the sum of a country's products and services. The world's third-largest economy grew modestly in the fourth quarter of last year after contracting the previous quarter.

Russia's war in Ukraine has driven already high energy costs even higher, which is a significant negative for Japan's resource-scarce economy. The yen has depreciated against the dollar, trading at around 130 yen to the dollar, making imports more expensive.

Japan has never had a state of emergency, but it has imposed limitations on companies on occasion, most notably requiring restaurants and bars to close early to prevent the spread of the coronavirus pandemic.

The previous limitations were lifted in March. Because of the highly contagious omicron variety, some medical professionals think the country has experienced an increase in COVID-19 cases since then. COVID-19 has caused roughly 30,000 deaths in Japan thus far.