Japan’s economy grapples with a corona-virus induced shock as the nation with the world’s third largest economy shrinks with an annualized 3.4% in the first quarter (January-March), the nation’s government said on Monday.
Even though Japan didn’t go for a full national lockdown, yet the previous quarter saw a 7.3% decline owing to the increase in the national sales tax. The two consecutive blows call for an official technical recession despite lifting state of emergency in 39 out of 47 prefectures.
After the declaration of national state in emergency in April, the economic condition has gotten worse and is expected to further shrink in the coming months. Given the dependence on trade with both Japan and the U.S, Japan’s supply chains and businesses have been massively disrupted.
According to the Japan National Tourism Organization, tourists to the country have dropped to 93% in March. Exports contracted 21.8%, while private residential investments fell by nearly 17% and household consumption dropped 3.1%. With reduction and losses in incomes, the pace of economic recovery may be sluggish.
Despite the government’s approval of 108 trillion-yen ($1.1 trillion) stimulus, the sum is barely enough at a crisis like the current pandemic. Prime Minister Shinzo Abe has pledged a second budget later this May to help prop up the economy.
Meanwhile, with a nosedive in profit, and sales slump, many businesses and companies are reaching their limits on operations. Notably, when U.S and China are having worse economic conditions, with a decline of 4.8% and 6.8% in the first quarter, Japan is trying to brace itself for shock to wages, tourism and automobile industries, supply chains, private consumption, and much worse negative growth in the current quarter.
