Japan’s economic growth plunged into recession in the first quarter as the COVID-19 pandemic squelched production, exports and spending, and fears are growing that worse times might lie ahead.
The Japanese Cabinet Office yesterday reported a 3.4 percent drop in the annual pace of seasonally adjusted real GDP for the January-March period. The annual pace gives what the rate would be when continued for a year. For just the quarter, the drop was 0.9 percent.
Exports dived 21.8 percent. Private residential investments slipped nearly 17 percent and household consumption fell 3.1 percent.
Analysts say things are expected to get worse as the world’s third-largest economy endures its biggest challenge since World War II.
Japan is in a technical recession, defined as two quarters straight of contraction, as its economy contracted 1.9 percent in the fourth quarter last year. Growth was flat in the July-to-September quarter last year and was a mere 0.5 percent growth in the previous quarter, according to the latest numbers.
Japan is extremely vulnerable to repercussions from the pandemic given its dependence on trade with China — where the virus emerged — and the US, which has been hit hard.
Travel, tourism and trade with those countries and others have languished amid shutdowns aimed at fighting the disease.
Manufacturers that are pillars of Japan’s economy, such as Toyota Motor Corp, have reported dismal financial results. Some companies have been unable to provide forecasts for this fiscal year. Profitability is nosediving as people economize and stay home. Production at some plants has halted.
The Japanese government has a rescue package of nearly ¥108 trillion (US$1 trillion) and plans more, including aid to small businesses and cash handouts.
More than 16,000 people in Japan have been infected with the virus and more than 700 have died, but those numbers are relatively low given it has the world’s oldest population and densely populated cities.
Japan eased its state of emergency last week for most of the country, although hotspots like Tokyo are maintaining restrictions. While many places are starting to reopen, normal operations and a recovery in consumption are not expected any time soon.
Robert Carnell, regional head of research Asia-Pacific at ING Bank NV, said that the damage to the private sector would continue, even as public demand picks up, helped by government aid.
“So even though the state of emergency has been criticized as being a halfhearted response to the pandemic, compared with many other nations, it has still resulted in a substantial reduction in economic activity, and will weigh on growth,” Carnell said.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts