Japan Slips Into Recession Worst Yet To Come As Pandemic Wreaks Havoc

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CORONAVIRUS | Japan's economy slipped into recession for the first time in four and a half years, GDP data showed on Monday, putting the nation on course for its deepest postwar slump as the coronavirus crisis takes a heavy toll on businesses and consumers
The world's third-largest economy shrank for the second consecutive quarter in the three months to March, intensifying the challenge for policymakers battling a once-in-a-century pandemic that has already caused widespread disruptions
Gross domestic product (GDP) contracted an annualised 3.4 percent in the first quarter as private consumption, capital expenditure and exports fell, preliminary official data showed, following a revised 7.3 decline in the October-December period, meeting the technical definition of a recession
The median market forecast was for a 4.6 percent contraction in the first quarter
The last time Japan suffered a recession was in the second half of 2015
"It's a near certainty the economy suffered an even deeper decline in the current quarter," said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute. "Japan has entered a full-blown recession."The coronavirus, which first emerged in China late last year, 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 been massively disruptive on supply chains and businesses, particularly in trade-reliant nations such as Japan
Private consumption, which accounts for more than half of Japan's US$5 trillion (RM21.75 trillion) economy, slipped 0.7 percent, versus a 1.6 percent drop expected by economists
That marked the second straight quarter of decline, as households were hit by the double-whammy of the coronavirus and a sales tax hike to 10 percent from eight percent in October last year
The virus' impact on corporate Japan has been telling, with the GDP data showing exports contracted sharply by six percent in the first quarter
The shakeout in global trade was highlighted in the recent March data, with Japan's exports slumping the most in nearly four years due to plunging US-bound shipments including cars
Capital expenditure fell 0.5 percent in the fourth quarter, against a median forecast for a 1.5 percent drop and marked the second consecutive quarter of declines, the data showed
Taken together, domestic demand knocked 0.7 percentage point off GDP growth, while external demand shed 0.2 point
All of this has put a strain on the labour market. The jobless rate in March rose to its highest in a year, while job availability slipped to a more than three-year low
Deepening slumpConditions are expected to have worsened in Japan in the current quarter after Prime Minister Shinzo Abe in April declared a nationwide state of emergency amid a rise in coronavirus infections
The emergency, which urged citizens to stay home and many businesses to close, was lifted for most regions on Thursday, but remained in effect for some big cities including Tokyo
Analysts polled by Reuters expect Japan's economy to shrink an annualised 22 percent in the current quarter, which would be the biggest decline on record and underscores the collapse in an activity that is expected to see the worst global slump since the Great Depression of the 1930s
The government has already announced a record US$1.1 trillion (RM4.79 trillion) stimulus package, and the Bank of Japan expanded stimulus for the second straight month in April. Abe has pledged a second supplementary budget later this month to fund fresh spending measures to cushion the economic blow from the outbreak
The nation's major globe-trotting manufacturers weren't spared the pandemic's sweeping impact either
Toyota Motor Corp on Friday said it would reduce vehicle production in Japan by 122,000 units in June, as a lack of demand for new cars due to the coronavirus prompts the automaker to keep its plants running on limited operations. The automaker is bracing for an 80 percent drop in full-year operating profit, its lowest in nine years
- Reuters

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