(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 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 that are slightly tighter than the ones in winter, but still less draconian than Europe’s lockdowns. Restaurants and bars in many big cities are now being asked to refrain from serving alcohol in addition to closing early.Failure to end the restrictions at the end of May, as planned, could also fuel concerns over the staging of the Tokyo Olympics. Cancellation of the Games would deal another blow to the economy and raise the likelihood that Suga will be consigned to a long list of short-lived premiers. The country is set to hold national elections by early fall.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 first-quarter drop in capital investment signals companies may be more cautious about the outlook than earlier thought, according to preliminary data, which is often revised. In recent days, a chorus of business executives have also started to voice concern over what they see as an unacceptably slow vaccine rollout in one of the world’s richest countries.CEOs Criticize Japan’s Slow Vaccine Push, Saying Growth at RiskStrong exports and industrial production, meanwhile, 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.Consumers also didn’t retrench as much as economists feared last quarter, a fact that may signal a reservoir of underlying demand that could help power the recovery ahead.The resilience also suggests that Suga’s targeted approach has indeed enabled the economy to fend off the worst of another emergency.“Once the virus situation starts to be more contained and people’s activity becomes more normalized, pent-up demand is likely to emerge,” economy minister and virus czar Yasutoshi Nishimura said after the GDP report was released. But rising infection numbers across the nation indicate that the government hasn’t got the balance right or hasn’t adjusted its restrictions quickly enough to account for new virus strains as infections rise and the logic of staging an Olympics is called into question.Until earlier this year Japan was seen a relatively successful example of virus control with low infection rates and deaths achieved without full lockdown measures. The positive optics have been changing as the country’s lengthy vaccine approval process and its slow rollout of jabs have left the country well behind the U.S, the U.K. and other countries with more aggressive inoculation programs.‘Where Are the Vaccines?’ Japan Public Asks as EU Doses RevealedIn an Asahi Shimbun newspaper poll published Monday, Suga’s support rate had sunk to 33%, close to the 30% mark that starts to put Japanese premiers in jeopardy.Japan has had far fewer virus deaths than other G-7 economies, but its 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.“The best economic measures is to accelerate vaccination,” said Dai-Ichi’s Shinke. “While many other countries consider loosening restrictions, Japan isn’t there yet.”(Adds comment from economy minister.)More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.