According to data released by Japan's Cabinet Office, the Japanese GDP contracted by 1%  first quarter, against expectations of 1.2% and the previous quarter’s 1.3%.

In annualized terms, the GDP declined by 3.9% in the first quarter, against expectations of 4.8% and the previous quarter’s 5.1%.

The Ministry of Finance reported that current accounts stood at 1321.8 billion in April, down from 2650.1 billion in the previous month, and below expectations of 1500.6 billion.

It seems that domestic demand weakened in the first quarter, as both capital spending and private consumption tumbled due to the effects of COVID-19 on the economy. Capital spending fell by 1.2% in quarterly terms, in line with expectations. Private consumption shrank by 1.5%, followed by government consumption which dropped by 1.1%.

Economy Minister Yasutoshi Nishimura commented that domestic spending could recover now that the economy is reopening.

"If infections subside, there'll be pent-up demand from not having been able to go eating out or traveling," Nishimura commented.

Japan's government is currently trying to stop the advance of the COVID-19 virus, which has infected 762,401 individuals in Japan since the beginning of the pandemic, including 13,574 deaths.

Until recently, Japan had been unsuccessful in its vaccination campaign, which seemed concerning given the upcoming Summer Olympics. However, the vaccine rollout has been picking up and the government is planning to launch its own vaccination certificate. As of Sunday, Japan's government has vaccinated about 9% of the population, which is a relatively low vaccination rate among advanced economies.

According to sources consulted by Reuters, the Japanese government is planning to highlight the need for fiscal reform, even though it is currently implementing a stimulus plan. The purpose of this plan is to avert deflation, which is a problem the country has been dealing with over the last couple of decades.

Since the beginning of the week, the Japanese yen has advanced by 0.10% against the US dollar, posting gains for the second consecutive week. By 4:48 GMT, the Japanese yen fell by 0.13% against the greenback to the 0.914050 level.