The Japanese economy shrank by 27.8 percent in the period from April to June compared to the same period last year due to the collapse of personal and corporate consumption during the coronavirus pandemic. The drop in Gross Domestic Product (GDP) during the observed period is the largest since the start of comparable data publication in 1980, the government announced on Monday. It also represents a continuation of the downward trend that began in the last quarter of 2019.
Personal consumption accounts for more than half of the Japanese economy and fell by 8.2 percent in the period from April to June as people stayed home due to restrictions imposed to curb the spread of the coronavirus. Corporate consumption also decreased by 1.5 percent. External demand, or exports minus imports, reduced GDP by a record three percentage points, which the government links to the spread of the dangerous virus and measures to contain it.
„The significant drop can be explained by the reduction in consumption and exports. I expect growth to be positive in the period from July to September. However, globally, the recovery is slow everywhere except in China“, emphasizes Takeshi Minami, chief economist at the Norinchukin Institute.
The economy began to recover after the lifting of restrictions at the end of May, but many analysts estimate that the recovery in the quarterly period ending in July was modest due to a renewed increase in the number of infections and thus stunted personal consumption.
The government has introduced extensive fiscal and monetary incentives to mitigate the pandemic’s impact on the economy, which had already been shaken by the increase in the value-added tax (VAT) in 2019 and the trade war between the U.S. and China, Reuters recalls.
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