The tumble was due mainly to a pull-back in spending on housing, cars and household appliances - all of which saw a surge in demand before the sales tax hike on April 1.
"An (economic) contraction in the second quarter is a certainty, but the job market improvements are positive for the economy," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
The data is unlikely to change dominant market expectations that the BOJ will hold off on further monetary stimulus probably for the rest of this year, analysts say.
"The decline in household spending is too large to ignore, but if you exclude auto sales there are signs that spending is bottoming out," said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.