JAPAN’S economy shrank less than initially reported in the first quarter on smaller cuts to plant and equipment spending, but the coronavirus pandemic still dealt a huge blow to overall demand.

Separate data showed yesterday growth in bank lending slowed sharply in May, while real wages posted the biggest monthly jump in more than a decade in April, in signs that the world’s third-largest economy was gradually overcoming last year’s pandemic hit.

Among the mixed indicators are some reassuring signs for policymakers, who are worried Japan’s recovery will lag major economies that have rolled out COVID-19 vaccines much quicker and are able to reopen faster.

The economy shrank by an annualized 3.9 percent in January-March, not as bad as the preliminary reading of a 5.1 percent contraction, but still posting the first fall in three quarters, Cabinet Office data showed yesterday.

The reading, which beat economists’ forecast for a 4.8 percent decline, equals a real quarter-on-quarter contraction of 1 percent from the prior quarter, versus a preliminary 1.3 percent drop.

The revised gross domestic product (GDP) decline was mainly due to a smaller fall in public and capital spending, which both eased less than initially thought, offsetting a slightly larger fall in private consumption.

“Overall, capital spending and private consumption remained weak, which showed weakness in domestic demand,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“The vaccine issue is the most important thing for the economic recovery,” he said, adding that the vaccination rate would need to come to about 50 percent to boost economic recovery prospects.(SD-Agencies)