The Bank of Korea: "Japan, with Olympic Hosting Canceled, Faces Inevitable Sharp Negative Growth"

Goldman Sachs -2.1%, Nomura Securities -2.0%, Deutsche Bank -1.7%, JP Morgan -1.3% Outlook

[Asia Economy Reporter Jang Sehee] A report from the Bank of Korea has indicated that Japan's economic growth rate is expected to record a negative figure due to the one-year postponement of the Tokyo Olympics.

In the 'Overseas Economic Focus' released on the 29th, the Bank of Korea stated, "With the cancellation of the Olympic hosting, it will be difficult for the economy to rebound through recovery in consumption, which has been depressed by the consumption tax increase and the spread of COVID-19, as well as through the influx of tourists," adding, "This year, Japan's economy is expected to inevitably experience a significant negative growth rate."

Major investment banks are also revising downward their growth rate forecasts for Japan's economy this year. Goldman Sachs projected Japan's growth rates for this year and next year at -2.1% and 1.1%, respectively. Nomura Securities (-2.0%), Deutsche Bank (-1.7%), and JP Morgan (-1.3%) all forecast negative growth rates for Japan's economy this year.

The Bank of Korea analyzed that although Japan's exports slightly improved in February, the economy is rapidly slowing down due to the spread of COVID-19.

Looking at Japan's February trade balance, exports increased by 3.4% compared to the previous month, and imports decreased by 6.1%, resulting in a significant improvement. However, the business sentiment index (BSI) from the corporate business outlook survey for the first quarter of this year recorded -10.1 across all industries, the lowest figure in about six years.

The expert business sentiment index for February also deteriorated sharply to 27.4 from 41.9 in the previous month. The retail and non-manufacturing sectors experienced significant worsening of business conditions. In particular, within the retail sector, industries such as food and beverages and travel and leisure showed poor performance.

In the financial market, economic losses due to the Olympic postponement are estimated to be between 1.7 and 3.2 trillion yen. Goldman Sachs forecasted that if the Olympics are postponed, the gross domestic product (GDP) would decrease by approximately 0.55 trillion yen (0.1%).

The Bank of Korea added, "This year, Japan's economy is expected to record a negative growth rate as the economic slowdown continues due to the spread of COVID-19 and the Tokyo Olympics are postponed by one year."

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