Japan’s economy shrinks at annual rate of 27.8%, worst contraction on record

In April-June, Japan recorded the worst contraction of all times as the economy shrank by 27.8 per cent at an annual rate, as per government data released on August 17. The economy of Japan is hard hit by the coronavirus pandemic with declining trade and consumption cycle. However, investors in Asia looked ahead to central bank meetings this week in China, Indonesia and the Philippines, with few other market-moving events in sight.

Coronavirus takes a toll on Japan's economy

Reports suggest that the Nikkei 225 in Tokyo fell 0.6% to 23,145.28 after the data showed the world’s third-largest economy shrank. The Cabinet Office reported that Japan’s gross domestic product which is the sum of a nation’s goods and services, fell 7.8% quarter on quarter. According to the reports, the latest drop is being considered the worst since World War II. The previous worst contraction was in the year 2009 with a drop of 17.8 per cent. 

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Stefan Angrick of Oxford Economics told AP, “The road ahead looks choppy as a resurgence in Covid cases will weigh on domestic and overseas spending”. The Minister of Economic and Fiscal Policy, Yasutoshi Nishimura said, “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”. He added, “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”. 

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According to reports, last year, the economy shrank 0.6% in the January-March period, and contracted 1.8% in the October-December period. Economists say consumer spending could be under more pressure after government aid including additional $600 weekly unemployment benefits expired. Investors are counting on Washington for another economic lifeline, but legislators are far apart on a possible package. According to analysts, the economy will gradually recover once the impact of the pandemic is curbed. Japan is highly dependent on China for export. Even though China is battling the virus, the demand still remains questionable. However, there are companies such as Nintendo co who have seen a boom in profits. 

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(Image Credits: AP)