Japan reported its sharpest contraction in gross domestic product ( GDP) on record, with its economy shrinking a record 27.8 per cent (annualised rate) in the second quarter as the coronavirus pandemic severely slowed economic activity in the country.
From April to June, Japan’s exports dropped at an annual rate of 56 percent, while private consumption decreased at an annual rate of nearly 29% as shoppers chose to stay home.
Japan is the world's third-largest economy after US and China.
Japan has so far reported 55,426 coronavirus cases and over 1100 virus-related deaths. Unlike other nations, Japan did not opt for a stringent national lockdown. However it declared a state of emergency in April which severely disrupted supply chains and businesses in the trade-reliant nation. Economic activity remained muted as workers and consumers chose to stay home.
After the country lifted its national emergency in May and people returned to work, economy showed strong signals of recovery mostly attributable to the beneficial impact of an stimulus package it had unveiled earlier (estimated at 40 percent of its GDP). The Bank of Japan also rolled out massive liquidity enhancing measures in April.However in July, case numbers began to surge again, prompting criticism that the government had re-opened too quickly.
The third consecutive quarter of economic contraction has knocked the size of real GDP to decade-low levels, erasing gains achieved by Prime Minister Shinzo Abe’s “Abenomics”, a term widely used to describe stimulus-led policy model that he has deployed since 20212.
Despite unveiling a record $1 trillion stimulus package, Japan’s economy shrank 3.4% in the first three months (January to arch) of 2020 compared to a year ago, representing its biggest slump since 2015.
Japan was already reeling under the impact of drastic drop in consumer spending dropped after Shinzo Abe-led government last October increased a tax on consumption to 10 percent from 8 percent in a move to help pay down the national debt and and fund social services as the country’s aging population. Japan’s national debit is already the the highest among developed nations. The country’s GDP suffered a 6.4% decline during the last quarter of 2019.
The outbreak of coronavirus pandemic also resulted in steep fall of Japan’s exports. The country was also forced it to postpone the Olympics.
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