The Japanese economy shrank at a record, even worse rate in the April-to-June quarter than initially estimated.
The Cabinet Office yesterday said that Japan’s seasonally adjusted real GDP contracted at an annualized rate of 28.1 percent, worse than the 27.8 percent figure given last month.
The COVID-19 pandemic, which has people staying home, restaurants and stores empty or closing, and travel and tourism nosediving, has hurt all the world’s economies and many companies. It has also slammed Japan’s export-reliant economy.
Photo: Reuters
Restoring growth would be a priority as the country prepares to choose a new leader to replace Japanese Prime Minister Shinzo Abe, who is resigning for health reasons. A vote among governing party members is expected next week.
Other data released yesterday showed cash earnings improving somewhat, and consumer spending and other business activity are expected to rebound following the sharp drops as the nation sought to bring the pandemic under control.
“However, high-frequency data show that growth is struggling to gain pace, suggesting a very gradual and protracted recovery after the initial bounce. The near-term outlook therefore remains challenging,” Oxford Economics said in a commentary.
On a quarterly basis, the economy contracted 7.9 percent, the revised figures showed, down from 7.8 percent in the preliminary data.
The annual rate shows what the number would have been if continued for a year.
The Cabinet Office said the government began keeping comparable records in 1980. The previous worst contraction, a 17.8 percent drop, was in the first quarter of 2009 during the global financial crisis.
However, anecdotally the latest decline is considered the worst since World War II.
Japan had already slipped into recession in the first quarter of this year, contracting by an annualized 2.3 percent. It shrank 7 percent in the final quarter of last year.
Recession is generally defined as two consecutive quarters of contraction. Growth was flat in July-to-September of last year.
Domestic demand contracted even worse in this year’s second quarter, as private investment declined.
Public demand, driven by government spending, also fared worse than earlier thought.
INVESTOR RESILIENCE? An analyst said that despite near-term pressures, foreign investors tend to view NT dollar strength as a positive signal for valuation multiples Morgan Stanley has flagged a potential 10 percent revenue decline for Taiwan’s tech hardware sector this year, as a sharp appreciation of the New Taiwan dollar begins to dent the earnings power of major exporters. In what appears to be the first such warning from a major foreign brokerage, the US investment bank said the currency’s strength — fueled by foreign capital inflows and expectations of US interest rate cuts — is compressing profit margins for manufacturers with heavy exposure to US dollar-denominated revenues. The local currency has surged about 10 percent against the greenback over the past quarter and yesterday breached
MARKET FACTORS: Navitas Semiconductor Inc said that Powerchip is to take over from TSMC as its supplier of high-voltage gallium nitride chips Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday in a statement said that it would phase out its compound semiconductor gallium nitride (GaN) business over the next two years, citing market dynamics. The decision would not affect its financial targets announced previously, the world’s biggest contract chipmaker said. “We are working closely with our customers to ensure a smooth transition and remain committed to meeting their needs during this period,” it said. “Our focus continues to be on delivering sustained value to our partners and the market.” TSMC’s latest move came unexpectedly, as the chipmaker had said in its annual report that it has
SECURITY WARNING: The company possesses key 3-nanometer technology, and Taiwan should prevent it from being transferred to China, a lawmaker said The Ministry of Economic Affairs yesterday said it would conduct a “strict review” of any proposed acquisition of Taiwanese tech company Source Photonics Co (索爾思光電), following media reports that a Chinese firm was planning to buy the company in the Hsinchu Science Park (新竹科學園區). Local media reported that Suzhou Dongshan Precision Manufacturing Co (東山精密), China’s largest printed circuit board manufacturer, had announced plans to acquire Source Photonics for 5.9 billion yuan (US$823.1 million). The ministry said it has not received an application from Source Photonics and has formally notified the company that any buyout would constitute a change in its ownership structure. The
ELECTRONICS: Strong growth in cloud services and smart consumer electronics offset computing declines, helping the company to maintain sales momentum, Hon Hai said Hon Hai Precision Industry Co (鴻海精密) on Saturday announced that its sales for last month rose 10 percent year-on-year, driven by strong growth in cloud and networking products amid the ongoing artificial intelligence (AI) boom. The company, also known internationally as Foxconn Technology Group (富士康科技集團), reported consolidated sales of NT$540.24 billion (US$18.67 billion) for the month, the highest ever for the period, and a 10.09 percent increase from a year earlier, although it was down 12.26 percent from the previous month. Hon Hai, which is Apple Inc’s primary iPhone assembler and makes servers powered by Nvidia Corp’s AI accelerators, said its cloud
RSS