Japan yesterday said that its economy contracted more than initially believed in the final quarter of last year, reflecting the country’s economic fragility even before the COVID-19 outbreak began to threaten global growth.
The gloomy revised figures led economists to project Japan is headed for its first recession since 2012, with the viral outbreak seen depressing exports.
The country’s GDP for the October-to-December last year quarter was revised down to a contraction of 1.8 percent, dropping further from the 1.6 percent contraction estimated last month.
Photo: Reuters
The fall was also sharper than a 1.7 percent contraction estimated by private economists, according to a survey by the Nikkei business daily.
The latest estimate tracked a contraction during the April-to-June quarter of 2014 after the government raised the consumption tax from 5 to 8 percent.
The tax was raised again, to 10 percent, in October last year, despite fears of its economic impact.
The fourth quarter also saw a series of natural disasters, including typhoons that caused widespread flooding.
The nation logged a larger-than-expected fall in non-residential investments that pushed overall domestic demand to shrink by 2.3 percent, rather than a fall of 2.1 percent estimated earlier, according to the Japanese Cabinet Office.
Japan faces a difficult path ahead, with the global virus outbreak expected to depress growth at home and abroad, particularly pressuring exports.
“Unfortunately, any recovery in Q1 has been nipped in the bud by the global spread of the coronavirus,” Capital Economics Ltd economist Tom Learnmouth said.
“We have penciled a 0.5 percent quarter-to-quarter contraction in GDP this quarter [January through March],” he said, raising the possibility of a recession.
“That’s likely to be primarily driven by plunging export volumes,” he said.
Consumer spending would also be “hit hard,” with many people staying at home to avoid the virus, following calls from Japanese Prime Minister Shinzo Abe for the public to cancel unnecessary outings, while schools across the nation were requested to shut for most or all of this month.
“We think Japan’s GDP will shrink by 1 percent across 2020,” Learnmouth added.
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