×

Japan’s economy shrinks at record rate

TOKYO — Japan’s economy shrank at annual rate of 27.8 percent in April-June, the worst contraction on record, as the coronavirus pandemic slammed consumption and trade, according to government data released Monday.

The Cabinet Office reported that Japan’s preliminary seasonally adjusted real gross domestic product, or GDP, the sum of a nation’s goods and services, fell 7.8 percent quarter on quarter.

The annual rate shows what the number would have been if continued for a year.

Japanese media reported the latest drop was the worst since World War II. But the Cabinet Office said comparable records began in 1980. The previous worst contraction, a 17.8 percent drop, was in the first quarter of 2009, during the global financial crisis.

The world’s third largest economy was already limping along when the virus outbreak struck in China late last year. It has weakened as the pandemic gained ground, leading to social distancing restrictions and prompting many people to stay home when they can.

“In April, May, a state of emergency was issued, it was a situation where the economy was artificially stopped so to speak, and the impact was severe,” said Yasutoshi Nishimura, minister Economic and Fiscal Policy.

“These are tough numbers but they bottomed out in April and May, we would like to put all our efforts into returning to a growth trajectory,” Nishimura told reporters.

The economy shrank 0.6 percent in the January-March period, and contracted 1.8 percent in the October-December period last year, meaning that Japan slipped into recession in the first quarter of this year. Recession is generally defined as two consecutive quarters of contraction.

By comparison, the U.S. economy contracted at a rate of nearly 33 percent in the last quarter, while that in the UK skidded 20.4 percent.

Japanese economic growth was flat in July-September. Growth was minimal the quarter before that.

The recent downturn returned economic activity to the level last seen in the spring of 2011, just after the triple disasters of a massive earthquake, tsunami and nuclear plant meltdown in the northeast.

Prime Minister Shinzo Abe took office in late 2012 and has since seen the halting progress made under his “Abenomics” economic platform to spur inflation to restore sustained growth essentially drained away in the pandemic.

But as is true in the U.S. and many other countries, a combination of near-zero interest rates and massive asset purchases by the central bank have helped keep stock prices relatively steady. The benchmark Nikkei 225 index fell 0.7 percent on Monday.

Japan faces multiple challenges in maintaining growth as its population ages and shrinks and companies opt to invest in faster growing markets outside the country. The main drivers of growth, consumer spending and exports, have been hamstrung during the pandemic.

For the April-June period, Japan’s exports dropped at a whopping annual rate of 56 percent.TRT

Newsletter

Today's breaking news and more in your inbox

I'm interested in (please check all that apply)