Gross domestic product shrank a yearly 3.4% in the three months through March from the previous quarter as exports slid and social distancing crimped consumer spending, Cabinet Office figures showed on Monday. While the result was slightly better than an expected 4.5% drop, helped by a downgrade of the last quarter’s contraction, economists and policy makers agree that worse is in store in the present quarter.
Two consecutive quarters of shrinking GDP confirm that the world’s third-largest economy fell into a recession even before Prime Minister Shinzo Abe’s April declaration of national emergency. Analysts see a 21.5% contraction in the three months through June, a record for official data going back to 1955.
“There’s no doubt that this quarter has gotten much worse,” said economist Takeshi Minami at Norinchukin Research Institute. “Companies are struggling to secure funding and that suggests business investment will remain weak and many workers are concerned about their wages.”
The crisis has put pressure on policy makers to step up stimulus measures that, at a record 117 trillion yen ($1.1 trillion), already total more than 20% of GDP.
“It’s near certainty the economy suffered an even deeper decline in the current quarter,” said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute. “Japan has entered a full-blow recession.”
Picture caption credit: Prime Minister Shinzo Abe talks to U.S. President Donald Trump as they attend a meeting on the digital economy at the Group of 20 Summit in Osaka on Friday. | AFP-JIJI
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