Coronavirus: Japan suffers its biggest economic recession on record

0
90


Image copyright
Getty Images

Japan’s economy has shrunk at its fastest pace on record as it battles the coronavirus pandemic.

The world’s third-largest economy saw gross domestic product fall 7.8% in April-June from the previous quarter, or 27.8% on an annualized basis.

Japan was already struggling with weak economic growth before the crisis.

The figures released on Monday are a stark reminder of the severe financial impact facing countries around the world.

Japan entered recession earlier this year after two successive quarters of economic contraction.

Its latest data for the April-June quarter was the biggest drop since comparable figures became available in 1980 and was slightly higher than analysts’ expectations.


Media playback is not supported on your device
Media captionWhat is a recession?

One of the main factors behind the crisis has been a sharp drop in domestic consumption, which accounts for more than half of the Japanese economy. Exports have also fallen sharply as global trade is hit by the pandemic.

The latest data is the third consecutive quarter of decline for the Japanese economy, which is its worst performance since 1955.

The recession is putting additional pressure on a Japanese economy that was already struggling with the effects of a 10% sales tax hike last year, with Typhoon Hagibis.

After the crisis, hopes for a rebound

Japan is the latest in a series of Asian economies to report significantly weaker second-quarter GDP data.

It shouldn’t come as a surprise: No one escaped the scope of the pandemic, and while there was no strict lockdown, people generally stayed inside and didn’t spend any money.

This has a ripple effect on corporate profits, as consumers buy less and therefore businesses earn less.

It’s a vicious cycle which in turn leads to a lack of confidence in the prospects for hiring – which means that job prospects are nervous as well. It all shows up in the numbers today.

Yet now is the time to look to the future and the possibility of a rebound.

Japan is expected to do better than other economies according to some analysts. Capital Economics says that even though the world’s third-largest economy is in the midst of a second wave of infections, its health care systems are not overwhelmed and new cases have started to decline. The research house says it expects third-quarter GDP to rebound – and continue until next year.

Ray of light

After the record contraction, most analysts expect Japan’s economic growth to rebound in the coming months.

Prime Minister Shinzo Abe has introduced massive stimulus packages aimed at helping cushion the blow of the pandemic.

As Japan lifted state of emergency measures at the end of May, fears persist that a recent spike in infections could hit business and household spending again.

China, the world’s second-largest economy, also offers reasons for hope. Its economy rebounded between April and June, with growth of 3.2%.

LEAVE A REPLY

Please enter your comment!
Please enter your name here