The economy of Japan has fallen into recession for the first time since 2015 due to impact of the continued escalation of the coronavirus pandemic.
Japan, the world’s third biggest economy, shrank at an annual rate of 3.4% in the first three months of 2020, as the coronavirus pandemic continues to spread. Globally, the economic impact of the pandemic is at approximately $8.8 trillion.
Technical Recession and Outlook
The country posted a 3.4% decline in its gross domestic product (GDP) during the quarter, which was preceded by a 6.4% fall during the last quarter of 2019, pushing its economy into a technical recession.
This was despite Japan not going into full national lockdown and opted to issue a state of emergency in April. severely affecting supply chains and businesses, which were heavily dependent on trade.
Aside from the impact of the coronavirus, Japanese consumers were also affected by the sales tax increase implemented in October, raising it from 8% to 10%.
The government has lifted the state of emergency in 39 out of its 47 prefectures but economic forecast for Japan remains dim.
According to analysts surveyed by Reuters, they expect the country’s economy to contract by 22% during the current quarter. This would represent Japan’s biggest decline on record.
A record $1 trillion stimulus package has been announced by the national government while the Bank of Japan expanded its stimulus measures for the second straight month in April.
Japanese Prime Minister Shinzo Abe has pledged a second budget later this month to finance new spending measures to lessen the pandemic’s economic impact.
Last week, the German economy fell by 2.2% in the first quarter of 2020, with the coronavirus pandemic pushing the European country into recession. This was the biggest quarterly decline the country has experienced since 2009, under the global financial crisis.
The Federal Statistics Office report was released as the country implements its initial tentative steps to lift the lockdown. Business establishments are starting to reopen, students will slowly return to schools and football games are being held behind closed doors.
The statistics office also reported a revision of economic data from the fourth quarter of 2019, revealing a 0.1% contraction. This means that the country’s gross domestic product (GDP) growth has been negative for the past two quarters, which technically means it is in a recession.
The statistics office issued a warning that the data were subject to extreme uncertainty, with the next estimate to be released on May 25.
While Germany has the largest economy in Europe, the decline is not as bad as other neighboring countries have recorded. France reported a a decline of 5.8% while Italy’s economy fell by 4.7%.
This can partly be attributed to the German states’ decision to allow factories and construction sites to remain open, as well as the national government’s unprecedented $1.7 trillion rescue package
While Japan officially became the first among the world’s top three economies to fall into recession, the country actually appears to be doing better or less worse compared with other major economies.
The US posted a 4.8% annual rate of decline in the first quarter of this year and is expected to shrink by more than 25% during the quarter ending in June. This would be the sharpest decline for the US economy since the Great Depression of the 1930s.
Meanwhile, China saw it economy contract by 6.8% in the first three months of 2020 compared with the previous year.