Japan's economy fell faster than expected in the first quarter as the weak yen continued to batter consumers, throwing a fresh challenge to the central bank's push to get interest rates further away from near zero.

Preliminary GDP data from the Cabinet Office on Thursday showed Japan's economy shrank 2.0% annualized in January-March from the prior quarter, faster than the 1.5% drop seen in a Reuters poll of economists. While preliminary capital spending data is often subject to heavy revisions in the final release, the across-the-board declines in all GDP components suggest Japan's economy had no major growth engine in Q1.

Downwardly revised data showed GDP barely grew in the fourth quarter of 2023, due to downgrades to capital expenditure estimates. That could create some hesitation for the Bank of Japan, which raised interest rates in March for the first time since 2007 and has since signalled its intention to continue tightening policy.