TOKYO: Japan dived into its first recession since 2015, according to official data on Monday as the world’s third-largest economy contracted by 0.9 percent in the first quarter amid the fallout from the coronavirus.
The drop in gross domestic product followed a 1.9-percent decline in the fourth quarter of 2019 as a tax hike and typhoons hit Japan hard even before the pandemic shut down much of the economy. A recession is defined as two consecutive quarters of negative GDP growth and the Japanese economy would suffer worse as the effects of the coronavirus become clear.
Economists expect that the worst is yet to come with the state of emergency in Japan and the severity of the pandemic among Western nations continuing to derail the Japanese economy. Nevertheless, the first-quarter result was slightly better than economists had forecast, with expectations for a 1.1-percent decline.
Japan has been hit less hard than most advanced economies by the coronavirus with just over 16,000 cases in the whole country and around 750 deaths. Authorities are concerned there could be an explosive spike especially in the densely populated capital Tokyo and requested citizens to stay home and businesses to close.
Prime Minister Shinzo Abe declared a state of emergency that was lifted last week for most of the country but kept in place for economic powerhouse regions Tokyo and Osaka.
Abe has pledged to give every citizen a cash handout of 100,000 yen ($930) in an attempt to mitigate the worst effects of the crisis. The handout was part of a package of stimulus measures worth around $1 trillion to protect jobs, bolster the medical sector and assist working families.
Japan contracted by 3.4 percent in the first quarter, preliminary official GDP data showed, less than a median market forecast for a 4.6 percent drop. The slump came on top of an even steeper 7.3 percent decline in the October-December period.
The pandemic has been massively disruptive on supply chains and businesses. The fallout of the virus on corporate Japan was immense with exports diving 6.0% in the first quarter, the biggest decline since April-June 2011.
Tourism has dropped by as much as 90 percent, industry and trade have ground to a halt and the virus also forced the postponement of the Tokyo 2020 Olympics that was seen as providing a boost to the economy.
Toyota Motor said on Friday it will cut domestic vehicle production by 122,000 units in June due to a lack of demand. The automaker expects an 80 percent drop in full-year operating profit, its lowest in nine years. The gloom in Japan is expected to deepen over the coming months.
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