BUMPY ROAD AHEAD:
With data showing that growth is struggling to gain pace, Japan is likely to see a very gradual and protracted recovery, Oxford Economics said
The Japanese economy shrank at a record, even worse rate in the April-to-June quarter than initially estimated.
The Cabinet Office yesterday said that Japan’s seasonally adjusted real GDP contracted at an annualized rate of 28.1 percent, worse than the 27.8 percent figure given last month.
The COVID-19 pandemic, which has people staying home, restaurants and stores empty or closing, and travel and tourism nosediving, has hurt all the world’s economies and many companies. It has also slammed Japan’s export-reliant economy.
Photo: Reuters
Restoring growth would be a priority as the country prepares to choose a new leader to replace Japanese Prime Minister Shinzo Abe, who is resigning for health reasons. A vote among governing party members is expected next week.
Other data released yesterday showed cash earnings improving somewhat, and consumer spending and other business activity are expected to rebound following the sharp drops as the nation sought to bring the pandemic under control.
“However, high-frequency data show that growth is struggling to gain pace, suggesting a very gradual and protracted recovery after the initial bounce. The near-term outlook therefore remains challenging,” Oxford Economics said in a commentary.
On a quarterly basis, the economy contracted 7.9 percent, the revised figures showed, down from 7.8 percent in the preliminary data.
The annual rate shows what the number would have been if continued for a year.
The Cabinet Office said the government began keeping comparable records in 1980. The previous worst contraction, a 17.8 percent drop, was in the first quarter of 2009 during the global financial crisis.
However, anecdotally the latest decline is considered the worst since World War II.
Japan had already slipped into recession in the first quarter of this year, contracting by an annualized 2.3 percent. It shrank 7 percent in the final quarter of last year.
Recession is generally defined as two consecutive quarters of contraction. Growth was flat in July-to-September of last year.
Domestic demand contracted even worse in this year’s second quarter, as private investment declined.
Public demand, driven by government spending, also fared worse than earlier thought.
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