Japan’s economy shrank by 1.8% annualized in Q1 2024, slightly better than the expected 2% drop. Despite the marginal improvement, the nation is grappling with persistent economic challenges. Business spending didn't decline as sharply as feared, but private consumption fell for the fourth consecutive quarter, marking the steepest drop in three quarters due to high inflation, slow wage growth, and the aftermath of a New Year’s Day earthquake. Additionally, exports plummeted more than imports, exacerbating the situation.

These troubling figures come as Japan attempts to normalize interest rates amidst rising inflation, raising concerns about a potential slide into stagflation.