( Tokyo, 17th August 2020 ) Japan’s economy shrank the most on record in the second quarter. As the new crown epidemic hits consumption and exports, policymakers are under pressure to take bold actions to prevent the recession from deepening.
Economic data released on Monday showed that Japan’s second-quarter gross domestic product (GDP) shrank by 27.8% year-on-year, the largest decline since 1980 on record, and the decline was slightly greater than the market’s median estimate of 27.2%.
Although Japan’s economic contraction was smaller than the 32.9% decline in the United States, it was much larger than the 17.8% decline in GDP in the first quarter of 2009 due to the global financial crisis triggered by the collapse of Lehman Brothers.
Japan's real GDP shrank to 485 trillion yen, the lowest level since the second quarter of 2011. At that time, Japan was still struggling to cope with 20 years of deflation and economic stagnation. Three consecutive quarters of economic contraction have caused Japan's real GDP to fall to a 10-year low. The results of Japanese Prime Minister Shinzo Abe's implementation of "Abenomics" since the end of 2012 have been wiped out.
Q3 positive rebound
Although the economy rebounded from its trough after the lockdown measures were lifted at the end of May, many analysts expect any rebound in economic growth from July to September will be mild, as the return of the epidemic will cause consumers to tighten spending.
Chief Researcher Nan Takeshi of the Institute of Agriculture and Forestry Research said, "The decline in consumption and exports can be used to explain the sharp decline. I expect the growth in the third quarter to turn positive. However, except for China, the global rebound is expected. Will be sluggish."
The decline in global car sales has hit manufacturers such as Mazda and Nissan as well as their component suppliers, which are one of the biggest sources of power for the Japanese economy.
In addition, capital expenditures fell 1.5% in the second quarter, which was smaller than the market’s forecast of a 4.2% decline, as strong software investment offset other sluggish spending. Japan’s Minister of Economic Regeneration, Yasumi Nishimura, said at a press conference, “We expect to do our utmost to promote the Japanese economy. The economy may have bottomed out in April and May, and domestic demand will begin to recover.”
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