Japan's Q2 GDP Growth Rate Expected to Be Worst Since Postwar... Recovery May Take 4 to 6 Years
[Asia Economy Reporter Jeong Hyunjin] Due to the impact of the novel coronavirus infection (COVID-19), Japan's second-quarter gross domestic product (GDP) is expected to fall to the worst level since World War II.
According to the Asahi Shimbun on the 19th, Yoshimasa Maruyama, Chief Market Economist at SMBC Nikko Securities, forecasted that Japan's real GDP growth rate in the second quarter of this year will decrease by 22.4% on an annualized basis compared to the previous quarter.
The Asahi reported, "If this forecast holds true, the situation will worsen compared to the -17.8% recorded in the first quarter of 2009 after the global financial crisis," adding, "It is the worst level since 1980, for which comparable data exists." In this regard, a Cabinet Office official pointed out, "Isn't this practically the worst decline since World War II?" the newspaper reported.
The Japanese government expected the economy to recover soon, considering the GDP decline in the fourth quarter of last year as a temporary shock caused by the consumption tax rate hike implemented in October of the same year. However, Japan's first-quarter GDP growth rate, announced the day before, recorded a 0.9% decrease compared to the previous quarter and -3.4% on an annualized basis. Personal consumption decreased by 0.7%, housing investment by -4.5%, equipment investment by -0.5%, and public investment by -0.4%. Exports and imports also fell by 6.0% and 4.9%, respectively. Consequently, concerns about an economic recession are growing.
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The reason Japan's economy is expected to suffer greater damage in the second quarter is that the Japanese government's COVID-19 response measures were concentrated during this period. Due to movement restrictions, many factories in Japan were closed, schools were shut down, and consumption sharply declined. Ryutaro Kono, Chief Economist at BNP Paribas Securities, forecasted that it will take 4 to 6 years for the economy to recover to its original level.
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