Japan's Q1 GDP shrinks as Ukraine, cost of living cloud outlook

Japan's economy fell for the first time in two quarters in the first three months of the year as COVID-19 curbs hit the service sector and the Ukraine war and surging commodity prices created new headaches for consumers and businesses.

The decline presents a challenge to Prime Minister Fumio Kishida's drive to achieve growth and wealth distribution under his "new capitalism" agenda, stoking fears of stagflation - a mix of tepid growth and rising inflation.

The world's No 3 economy shrank at an annualised rate of 1 percent in January-March from the previous quarter, gross domestic product (GDP) figures showed, versus a 1.8 percent contraction seen by economists. It translated into a quarterly drop of 0.2 percent, the Cabinet Office data showed, versus market forecasts for a 0.4 percent drop.