Japan's economy shrank for the first time in a year in the March quarter, data showed on Friday, underscoring the fragile nature of its recovery now under threat from US President Donald Trump's trade policies.

Real gross domestic product (GDP) contracted an annualised 0.7 percent between January and March, preliminary government data showed, much bigger than a median market forecast for a 0.2 percent drop.

It followed a revised 2.4 percent increase in the previous quarter.

On a quarter-on-quarter basis, the economy shrank 0.2 percent compared with market forecasts for a 0.1 percent contraction.

Private consumption, which accounts for more than half of Japan's economic output, was flat in the first quarter, compared with market forecasts for a 0.1 percent gain.

Capital expenditure increased 1.4 percent compared with market forecasts for a 0.8 percent gain, the data showed.

External demand, or net exports, shaved 0.8 percentage point off GDP growth, the data showed.

Having exited a decade-long stimulus last year, the central Bank of Japan hiked rates to 0.5 percent in January and has signalled its readiness to keep raising borrowing costs if a moderate economic recovery keeps Japan on track to durably hit its 2 percent inflation target.

But fears of a Trump-induced global slowdown forced the central bank to sharply cut its growth forecasts at its April 30-May 1 policy meeting and cast doubt on its view that sustained wage hikes will underpin consumption and the broader economy. (Reuters)