Economy falls as COVID-19 takes a global toll . . .
Official data released by Japan’s Cabinet this Monday confirmed that the world’s third largest economy has now officially entered into a recession. The picture was bleak as first-quarter gross domestic product (GDP) data revealed Japan’s economy has shrunk for a second consecutive quarter. Analysts forecast that the latest GDP numbers, contracting by 3.4 per cent in January to March 2020 and by 7.3 per cent in October to December 2019, are setting the course for worse to come – predicting that Japan will enter its deepest economic slump since the Second World War.
The worst is yet to come . . .
The economic impact of COVID-19 began to ravage Japan’s export-dependent economy in the first quarter of 2020, the largest decline since the devastating March 2011 Tōhoku earthquake. Last month, the Government of Japan announced a record C$1.5 trillion stimulus package, and the Bank of Japan expanded stimulus for a second straight month. Prime Minister Shinzo Abe has also pledged a second supplementary budget later this month to fund spending measures intended to cushion the economic impact of the outbreak but many analysts warn that government support will be too little, too late. Analysts polled by Reuters expect the country's economy to shrink 22 per cent which would be Japan’s biggest decline on record. Last Thursday, COVID-19 emergency restrictions were lifted in most regions of the country but have remained in effect for some large cities, including Tokyo. However, even with an easing of restrictions, analysts forecast continued consumer gloom, with COVID-19 not the only cause of decreased consumption. In October 2019, the Japanese economy also experienced a slump as households experienced a sales tax hike from 8 to 10 per cent.
Canada feels Japan’s economic pain . . .
Japan faces a unique challenge as its economy has been stagnant for decades. However, despite being the first of the world’s three largest economies to technically enter into a recession, it appears to be suffering less than some other major economies. Both the U.S. and Canadian economies are forecast to shrink more than 25 per cent this quarter. This however does nothing to help Japan’s economy as Japanese policy makers have little control over changing global demand for Japanese exports, a main driver of Japanese growth.