Japan economy falls into recession; Q1 GDP contracts 3.4% year on year

SINGAPORE (ICIS)–Japan has slipped into a recession with another quarter of GDP contraction as the coronavirus pandemic continues wreaking havoc on the world’s third-biggest economy.

It posted an annualized GDP contraction of 3.4% in the first quarter of 2020, preliminary government data showed, following on from a revised steeper contraction of 7.3% in October-December 2019.

On a quarter-on-quarter seasonally adjusted basis, the decline was 0.9% from a 1.9% contraction in the December 2019 quarter, which was hit by a two-percentage point hike in consumption tax.

Japan has declared a state of emergency in April this year to contain the spread of the deadly coronavirus outbreak, which started in China late last year.

“We expect the bulk of the impact from the coronavirus pandemic to be felt in Q2, given the government’s state of emergency declaration in April,” Stefan Angrick, senior economist at Oxford Economics, said in a research note on Monday.

“In addition to falling domestic demand, we expect the impact on trade to increase as global demand for Japanese exports falters,” he said.

The pandemic – which has infected more than 4.5m people globally and killed more than 300,000 to date – has plunged the global economy into a recession as countries implement border closures and lock-downs to contain the deadly flu-like disease.

“We look for a recovery later in 2020, helped by policy support, but expect growth to recover only gradually,” Angrick said.

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