Japan’s economy contracts at record pace as coronavirus hits spending

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Japan suffered its largest economic contraction on record in the second quarter, as the coronavirus pandemic crushed business and consumer spending, keeping policymakers under pressure for bolder action to prevent
the recession is getting worse.As the economy emerges from the doldrums after the lockdowns were lifted in late May, many analysts expect any rebound in growth from July to September to be modest as a further rise in infections keeps the market cords of the tight consumers.

Gross domestic product (GDP) fell 27.8% on an annualized basis in April-June, government data showed on Monday, marking the largest drop since comparable data became available in 1980.

It was the third consecutive quarter of contraction and a larger decline than the median market forecast for a decline of 27.2%.

Private consumption, which accounts for more than half of the Japanese economy, fell 8.2% for the quarter, more than analysts’ forecast of a 7.1% decline.

Capital spending fell 1.5% in the second quarter, less than the median market forecast for a decline of 4.2%.

External demand, or exports minus imports, reduced GDP by 3.0 percentage points as the pandemic dampened global demand, the data showed.

Japan has rolled out massive fiscal and monetary stimulus to cushion the blow of the pandemic, which has hit an economy already reeling from last year’s sales tax hike and the trade war between states United and China.

As the economy reopened after the government lifted state of emergency measures at the end of May, a worrying resurgence in infections is clouding the outlook for business and household spending.

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