Japan's economy slips into recession

18 Mai, 2020, 09:37 | Auteur: Auguste Feret
  • Japan is on course for its deepest postwar slump as the coronavirus crisis ravages businesses and consumers

Japan's economy slipped into recession for the first time in four-and-a-half years, putting the nation on course for its deepest post-war slump as the coronavirus crisis ravages businesses and consumers.

Analysts warn of an even bleaker picture for the current quarter as consumption crumbled after the government in April requested citizens to stay home and businesses to close, intensifying the challenge for policymakers battling a once-in-a-century pandemic.

An annualized decline of 4.6% was expected, according to a survey of 33 economists by the Japan Center for Economic Research, a Nikkei affiliate.

Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, said the second quarter would be "significantly worse", forecasting a decline of around six to seven per cent.

Japan's economy contracted 0.9% in January-March, or at an annualized pace of 3.4%, the Cabinet Office said Monday, showing that the world's third-largest economy was in a technical recession even before a state of national emergency was declared over the coronavirus outbreak.

The full impact of the coronavirus on Japan's economy has still to be felt and economists are bracing for a catastrophic second quarter. "Japan has entered a full-blown recession".

The coronavirus, which first emerged in China late a year ago, has ravaged the global economy as many nations went into strict lockdowns to curb the outbreak that has so far killed over 310,000 people worldwide. The pandemic has disrupted supply chains and businesses, particularly in trade-reliant nations such as Japan.

The shakeout in global trade was highlighted in the recent March data, with Japan's exports slumping the most in almost four years due to plunging US-bound shipments including cars.

The nation's major globe-trotting manufacturers weren't spared the pandemic's sweeping impact either.

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The gloom in Japan is expected to deepen over the coming months.

The drop in gross domestic product followed a 1.9-per cent decline in the fourth quarter of 2019 as a tax hike and typhoons hit Japan hard - even before the pandemic shut down much of the economy. Japan has so far reported 16,337 coronavirus cases and 756 deaths.

On a quarter-on-quarter basis, GDP shrank 0.9 in January-March, compared with the median forecast for a 1.2% decline, the data showed.

Still, it marked the second straight quarter of declines, as households were hit by the double-whammy of the coronavirus and a sales tax hike to 10 percent from 8 percent in October past year.

Private consumption, which makes up more than half of the economy, fell 0.7%, while capital spending dropped 0.5% and exports slid 6.0%, it showed.

Taken together, domestic demand knocked 0.7 percentage point off GDP growth, while external demand shed 0.2 point. The jobless rate in March rose to its highest in a year, while job availability slipped to a more than three-year low.

The government has come up with a rescue package of almost 108 trillion yen ($1 trillion), and plans more, including aid to small businesses and cash handouts. Abe has pledged a second supplementary budget later this month to fund fresh spending measures to cushion the economic blow from the outbreak.

"As always in Japan, the implementation is very slow. To recover from this crisis, it will take about two years at least".

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