The Japanese economy has plunged into recession as the coronavirus pandemic and a consumption tax hike from last year ravaged the world’s third-largest economy.
Japan’s gross domestic product (GDP) contracted at an annualized rate of 3.4 per cent in the first quarter of 2020, according to a report released by the Cabinet Office.
Economic growth in the last quarter of 2019 was revised down to a 7.3-per-cent contraction from a 7.1-per-cent fall estimated in March, the office said.
The reading marks the biggest contraction in more than five years and comes after Prime Minister Shinzo Abe’s government raised the consumption tax from 8 per cent to 10 per cent on October 1.
Two straight quarters of negative growth means that Japan has entered a recession amid the coronavirus crisis, as was widely expected.
A Cabinet Office official expected the GDP in the April-June period to be “far worse” than the reading in the first quarter, calling the current economic situation “the largest crisis” in the post-World War II era, Kyodo News reported.
Shops, restaurants and entertainment venues were shut and the public was urged to refrain from non-essential and non-urgent outings to contain the spread of the coronavirus as Japan’s nationwide state of emergency lasted about one month due to the coronavirus pandemic.
Abe’s government decided Thursday to lift the emergency status in 39 of the country’s 47 prefectures ahead of the scheduled expiry on May 31, while metropolitan areas such as Tokyo and Osaka remain under the measure.
Speaking at a news conference in the morning, Economic Revitalization Minister Yasutoshi Nishimura vowed to “build a thorough framework to protect businesses, jobs and livelihoods of people.”
The Cabinet Office said consumer spending, a major component of output, slipped 0.7 per cent quarter on quarter after a 2.9-per-cent decline in the final three months of last year, following a consumption tax increase in October.
Corporate investment fell 0.5 per cent in the January-to-March quarter, the report showed.
Exports sank 6 per cent as the outbreak of the novel coronavirus that originated in China, Japan’s biggest trading partner, caused large-scale disruptions to economic activity and business operations.
Japan’s shipments to China dropped 8.7 per cent from a year earlier in March, the Finance Ministry reported last month.
Travel restrictions caused by the pandemic have also decimated the tourism industry as the Japanese economy has relied more on overseas visitors, especially those from Asia, in recent years.
The number of overseas visitors to Japan in March took a record 93 per cent nosedive to 193,700 from 2.76 million a year earlier, the Tourism Agency said.
The pandemic also forced the International Olympic Committee and Japan to postpone this summer’s Tokyo Games by one year.
Some experts already warned the postponed Olympics might not be held next year, either, as the world is expected to continue struggling to contain the virus.
In order to help mitigate the economic fallout from the pandemic, Japan’s parliament enacted a 25.69-trillion-yen (240-billion-dollar) supplementary budget in late April with the government providing 100,000 yen to all residents in the country.
Nishimura said the government “will have a secondary supplementary budget enacted as swiftly as possible.”