Japan Slides Into Recession - With Forecasts Of Worse To Come - Capital Business
Connect with us

Hi, what are you looking for?

Japan's Prime Minister Shinzo Abe arrives at the Hangzhou Exhibition Center in China to participate in the G20 Summit, on September 4, 2016

Coronavirus

Japan Slides Into Recession — With Forecasts Of Worse To Come

The virus has hit Japanese consumption © AFP / Kazuhiro NOGI

Tokyo, Japan, May 18 – Japan dived into its first recession since 2015, according to official data Monday, with the world’s third-largest economy shrinking by 0.9 percent in the first quarter as it wrestles with the fallout from the coronavirus.

The drop in gross domestic product followed a 1.9-percent 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.

A recession is defined as two consecutive quarters of negative GDP growth and some analysts predicted the Japanese economy would suffer worse as the effects of the coronavirus become clear.

“We expect the worst is yet to come, with the state of emergency in Japan and the severity of the pandemic among Western nations continuing to derail the Japanese economy,” said Naoya Oshikubo, senior economist at SuMi TRUST.

Nevertheless, the first-quarter result was slightly better than economists had forecast, with expectations for a 1.1-percent decline.

Japan has been hit less hard than most advanced economies by the coronavirus, with just over 16,000 cases in the whole country and around 750 deaths.

However, authorities were concerned there could be an explosive spike — especially in the densely populated capital Tokyo — and urged people to stay indoors and businesses to shut down.

Prime Minister Shinzo Abe declared a state of emergency that was lifted last week for most of the country but kept in place for economic powerhouse regions Tokyo and Osaka.

“Personal consumption has been the main casualty of the COVID-19 pandemic as consumer spending has been greatly affected by this due to people staying at home,” Oshikubo said.

“But uncertainty stemming from the spread of the virus has also hit private capital investment as companies curtail their expenditure programmes,” added the expert.

Advertisement. Scroll to continue reading.

– ‘Significantly worse’ –

In an attempt to mitigate the worst effects of the crisis, Abe has pledged to give every citizen a cash handout of 100,000 yen ($930).

The handout was part of a package of stimulus measures worth around $1 trillion to protect jobs, bolster the medical sector and ease the pain for working families.

Tourism has dropped by as much as 90 percent, industry and trade have ground to a halt and the virus also forced the postponement of the Tokyo 2020 Olympics that was seen as providing a boost to the economy.

According to the details of the GDP report, private consumption dropped 0.7 percent quarter-on-quarter, with both household consumption and corporate investment slipping 0.8 percent and 0.5 percent respectively.

But as the coronavirus pandemic battered the global economy, Japanese exports were the hardest hit, falling by six percent compared to the previous quarter.

The full impact of the coronavirus on Japan’s economy has still to be felt and economists are bracing for a catastrophic second quarter.

Oshikubo said his organisation was forecasting an eyewatering 10.2-percent plunge in the second quarter, which would be the worst since the 2008 financial crisis.

Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, told AFP the second quarter would be “significantly worse”, forecasting a decline of around six to seven percent.

Advertisement. Scroll to continue reading.

“As to the question of when the economy will pick up, it all depends on the number of infected and when the virus fades out.”

Advertisement

More on Capital Business

Insurance

NAIROBI, Kenya, Mar 29 – Britam has recorded a 65 percent jump in profit before tax to Sh4. billion for the year ended 2023...

World

BEIJING – Chinese tech firm Xiaomi on Thursday night released its first self-developed new energy vehicle model SU7. Three versions of the model —...

Climate

NAIROBI, Kenya, Mar 29 – Food waste across the globe continues to fuel climate change, nature loss and pollution while hurting the global economy,...

Kenya

NAIROBI, March 28 (Xinhua) — Kenya on Thursday launched the national research repository for all research output undertaken in the country. Beatrice Inyangala, principal...

World

TOKYO, March 29 (Xinhua) — The unemployment rate in Japan increased in February from a month earlier, the government said in a report on...

Investments in Africa

NAIROBI, Kenya, Mar 28 – BURN Manufacturing (BURN), a carbon project developer, has announced the completion of a follow-on carbon project investment from Key...

World

LONDON, March 28 (Xinhua) — The gross domestic product (GDP) of the United Kingdom (UK) fell by an unrevised 0.3 percent in the last...

Top Story

NAIROBI, Kenya, Mar 28 – A total of 28 insurance companies dominate the list of abuse of buyer power cases in Kenya, the latest...