Japan’s growth drops amid pandemic, worse times likely ahead
Tokyo — Japan’s economic growth plunged into recession in the first quarter as the coronavirus pandemic squelched production, exports and spending, and fears are growing worse times may lie ahead.
The Cabinet Office reported Monday a drop of 3.4% annual pace in seasonally adjusted real gross domestic product, or GDP, the total value of a nation’s goods and services, for the January-March period, compared to the previous quarter.
The annual pace gives what the rate would be when continued for a year. For just the quarter, the drop was 0.9%.
Exports dived 21.8%. Private residential investments slipped nearly 17%, and household consumption edged down 3.1%.
Analysts say things are expected to get worse, as the world’s third-largest economy undergoes its biggest challenge since World War II.
Japan is in a technical recession, defined as two quarters straight of contraction, as its economy contracted 1.9% in October-December. It remained flat July-September, and eked out 0.5% growth for April-June, according to the latest numbers.
Japan is extremely valuable to the economic damage from the ongoing outbreak. It is dependent on trade with both China and the U.S., the country where the pandemic began and the country where it has hit hardest.
Travel, tourism and trade with those countries and others have faded.
Manufacturers that are pillars of Japan’s economy, such as Toyota Motor Corp., have reported dismal financial results results. Some companies were unable to provide forecasts for this fiscal year. Profitability is nose-diving as people hold back on buying. Production at some plants have halted.
The government has come up with a rescue package of nearly 108 trillion yen ($1 trillion), and is announcing more, including aid to small businesses and cash handouts.
Japan has seen more than 16,000 people infected with the virus and more than 700 deaths, but those numbers are relatively low given it has the world’s oldest population.
Japan eased its state of emergency last week for most of the country thought hot spots like Tokyo are maintaining restrictions. Though many places are starting to reopen, normal operations and a recovery in consumption are not expected anytime soon.