(Bloomberg) -- Japan’s recovery stalled last quarter, with the economy shrinking more than analysts expected, as renewed restrictions to contain the coronavirus hit activity, raising the risk of a double-dip recession if the country cannot bring its virus emergency to a swift end.Gross domestic product shrank an annualized 5.1% from the prior quarter in the three months through March, ending a two-quarter streak of double-digit growth, the Cabinet Office reported Tuesday. Economists had forecast an overall contraction of 4.5%.The worse-than-expected result came as businesses unexpectedly cut investment, consumers pulled back and government outlays fell amid a suspension of a travel-promotion campaign to help the ailing tourism industry.Signs of renewed fragility in the economy heighten the risk that the economy could shrink again this quarter, as Prime Minister Yoshihide Suga’s administration struggles to speed up its vaccine rollout and contain virus cases using a targeted approach that attempts to limit the damage to the economy.“If the state of emergency is extended, that will certainly raise the odds of a contraction,” said economist Yoshiki Shinke at Dai-Ichi Life Research Institute. “Consumer spending is the biggest missing piece for the economy and it’s hard to predict because it’s very much dependent on the virus situation..”Suga last week added three more prefectures to the latest state of emergency, a move that puts about half of the economy under restrictions and further heightens the risk of another contraction this quarter.What Bloomberg’s Economist Says...“In the details of Japan’s deeper-than-expected GDP contraction in 1Q, there was even more bad news -- a surprise drop in private investment and an unexpectedly steep buildup in inventories. These signal weakness in the manufacturing sector -- a rare growth driver amid the virus emergency -- and add to downside risks to the economy in 2Q.--Yuki Masujima, economistTo read the full report, click here.The drop in businesses investment, which was unexpected, suggests companies may be more cautious about the outlook than previously thought. Still, shoppers didn’t pull back as much as economists feared, which may signal a reservoir of underlying demand that could help power the recovery ahead.“Consumption didn’t fall much, which means efforts to contain the virus are not having much of an impact,” said economist Hiroaki Muto at Sumitomo Life Insurance Co. “The virus will continue to weigh on the economy in the second quarter. With vaccination delayed, the second quarter will be a tough period.”Strong exports and industrial production continue to provide a bedrock of support to the economy, even though a rise in imports caused the trade-component of the GDP to go negative in the first quarter.The outlook depends largely on whether Suga can lift a third virus emergency by the end of May, as planned.Japan has had far fewer virus deaths than other G-7 economies, but a slow vaccine rollout has limited its tools for fighting the outbreak and getting the economy back into gear. So far, only about 3% of the population has received even a single dose.(Updates throughout.)More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.