Japan economy shrinks at record rate

Japan’s economy shrank at annual rate of 27.8 per cent 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 per cent 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 per cent 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 per cent in the January-March period, and contracted 1.8 per cent 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 United States economy contracted at a rate of nearly 33 per cent in the last quarter, while that in the United Kingdom skidded 20.4 per cent.

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.

AP