Japan Revises Down Q4 Real GDP for Last Year... Decline Widens from 6.3% to 7.1%

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Japan's real gross domestic product (GDP) for the fourth quarter of last year was revised downward on the 9th from the initially announced preliminary figure. It is interpreted that the impact of the consumption tax hike, among other factors, was significant before the economic damage caused by the novel coronavirus infection (COVID-19) occurred.

According to Bloomberg News and others, Japan's Cabinet Office announced on the same day that the real GDP excluding price changes for October to December last year (final figure) decreased by 1.8% quarter-on-quarter. This marks the first decline in Japan's quarterly real GDP in five quarters (one year and three months) and is 0.2 percentage points lower than the preliminary figure announced on the 17th of last month.

On an annualized basis, it was recorded at -7.1%. The preliminary figure for Japan's fourth-quarter real GDP on an annualized basis last month was -6.3%. Although it was higher than during the previous consumption tax hike in the second quarter of 2014 (annualized -7.4%), the economic situation was worse than in the first quarter of 2011 (annualized -5.5%) during the Great East Japan Earthquake.

Specifically, capital investment decreased by 4.6% quarter-on-quarter, which was lower than the preliminary figure (-3.7%). There were effects such as reduced investment in office buildings and commercial facilities in the real estate sector. The decline in capital investment was the largest since the first to third quarters of 2009 (-6.0%) following the 2008 global financial crisis.

Personal consumption, which appears to have been directly impacted by the consumption tax hike, was recorded at -2.8%, revised upward by 0.1 percentage points from the preliminary figure (-2.9%). Foreign media reported that some adjustments were made due to demand for automobiles, home appliances, and cosmetics occurring just before the tax increase.

The Nihon Keizai Shimbun evaluated that "it has become clear that the Japanese economy was stagnant even before the spread of COVID-19." Kyodo News reported that due to the impact of the COVID-19 spread, there is a high possibility of negative growth in the first quarter (January to March) of this year as well, stating that the Japanese economy stands at a crossroads entering a phase of long-term stagnation.

This content was produced with the assistance of AI translation services.