Japan's economy falls into recession as virus takes its toll
Japan's economy falls into recession as virus takes its toll
Japan has fallen into recession as the financial toll of the coronavirus continues to escalate.To get more news about WikiFX, you can visit wikifx official website.
The world's third biggest economy shrank 3.4% in the first three
months of 2020 compared to a year ago, its biggest slump since 2015.
The coronavirus is wreaking havoc on the global economy with an estimated cost of up to $8.8tn (£7.1tn).
Last week, Germany slipped into recession as more major economies face the impact of sustained lockdowns.
Japan didn't go into full national lockdown but issued a state of
emergency in April severely affecting supply chains and businesses in
the trade-reliant nation.The 3.4% fall in growth domestic product (GDP)
for the first three months of 2020, follows a 6.4% decline during the
last quarter of 2019, pushing Japan into a technical recession.
More financial stimulus to come
Consumers have been hit by the dual impact of the coronavirus and a sales tax hike to 10% from 8% in October.
While Japan has lifted the state of emergency in 39 out of its 47
prefectures, the economic outlook for this current quarter is equally
gloomy.
Analysts polled by Reuters expect the country's economy to
shrink 22% during April to June, which would be its biggest decline on
record.
The Japanese government has already announced a record $1
trillion stimulus package, and the Bank of Japan expanded its stimulus
measures for the second straight month in April.
Prime minister
Shinzo Abe has pledged a second budget later this month to fund fresh
spending measures to cushion the economic blow of the pandemic.
How can Japan turn things around?
Japan faces a unique challenge as its economy has been stagnant for
decades, compared to the more buoyant economies of rivals the US and
China.
Japan also relies heavily on exporting its goods and has
little control over consumer demand in other countries which have been
severely impacted by coronavirus lockdowns. Many of its biggest brands,
like car firms Toyota and Honda, have seen sales slump across the world.
Tourism, which has long been a boost to the Japanese economy, has
also been hit hard as the pandemic keeps foreign visitors away. Japan
has had more than 16,000 confirmed coronavirus cases and around 740
deaths.
How does it compare to other major economies?
Things
look bleak for the Japanese economy in the short term, along with other
major economies around the world. But despite being the first of the
world's top three economies to officially fall into recession, the
country actually appears to be doing better, or less badly, than other
major economies.
While economists predict Japan's economy will
shrink by 22% this current quarter, they also predict that the US could
contract by more than 25%. The 3.4% decline also compares favourably to
the 4.8% the US suffered in the first three months of this year.
This was the sharpest decline for the US economy, the world's biggest, since the Great Depression of the 1930s.
China, the world's second largest economy, saw economic growth shrink
6.8% in the first three months of the year, its first quarterly
contraction since records began.
Both of those economies haven't
yet been confirmed as having fallen into a technical recession, which is
defined as two consecutive quarters of negative growth, but most
economists expect them to in the coming months.
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