Japan has joined Italy and France in recession as growth in the world’s third-largest economy fell an annualised 3.4% in the March quarter.
It was Japan’s first recession in 4-1/2 years and puts the economy on course for its deepest postwar slump as the impact of the COVID-19 pandemic flattens businesses and consumer demand.
The data means Australia’s second-largest export market is now in recession which is deepening (like the rest of the world).
Economists say the economy will see an even deeper slide in GDP this quarter of up to 22% or more, intensifying the downturn, even though the government has relaxed the national emergency across most of the country.
Only Tokyo and Osaka are the major exceptions and they are important – Tokyo is the most important economic area of Japan, with Osaka and the lockdowns will still hurt activity and growth.
The 3.4% annual slide in the March quarter (the 4th quarter of Japan’s financial year) followed a much deeper 7.3% slump in the final quarter of 2019 which was driven by the slump in consumption after the October 1 tax rise.
Quarter on quarter, growth fell 0.9% in the three months to March, a better outcome than the 1.9% slump in the three months to December from the September quarter.
With the growth of 0.6% and zero in the June and September quarters respectively last year, GDP in the year to March was down 2.2%
This time round it was the slide in exports and the gathering impact of COVID-19 that drive growth lower as private consumption, capital expenditure and exports fell.
Private consumption, which accounts for more than half of Japan’s $US5 trillion ($A7.8 trillion) economy, dipped 0.7%, versus a 1.6%drop expected by economists.
Exports contracted sharply by 6% in the first quarter.
Capital expenditure fell 0.5% in the quarter, the second consecutive quarter of declines as business confidence evaporated.
Taken together, domestic demand knocked 0.7 percentage point off GDP growth, while external demand fell 0.2 of a point.
As a result, the jobless rate in March rose to its highest in a year, while job availability slipped to a more than three-year low.
The Abe government has already announced a record $US1.1 trillion stimulus package, and the Bank of Japan expanded stimulus for the second straight month in April. Abe has promised a second supplementary budget later this month to fund fresh spending measures to cushion the economic blow from the outbreak.