Japan’s record economic sink sweeps off Abe era benefits

Japan was struck by its largest economic drop on record in the second quarter owing to the coronavirus pandemic as it drained shopping malls and smashed demand for cars and other exports, reinforcing the case for bolder policy action to avoid further recession.

 

Owing to the present conditions, Japan has reinforced bolder policy steps to avoid sinking into a deeper recession. The third straight quarter of drops thumped the extent of real gross domestic product (GDP) to decade-low levels, by eliminating the gains brought by Prime Minister Shinzo Abe’s “Abenomics” incentives policies positioned in late 2012.

 

Whereas the economy is rising from the doldrums, posy lockdown was raised in late May, several analysts anticipate any rebound in the existing quarter to be modest as a novel rise in infections keep consumers’ purse-strings firm. 

 

“The big decline can be explained by the decrease in consumption and exports,” stated Takeshi Minami, chief economist at Norinchukin Research Institute.

 

He further added: “I expect growth to turn positive in the July-September quarter. But globally, the rebound is sluggish everywhere except for China.”

 

The world’s third-largest economy dropped by an annualized 27.8% in April-June as displayed by government data on Monday, highlighting the biggest drop since corresponding data became available in 1980 and slightly shifted to a 27.2% drop forecast in a Reuters poll of analysts.

 

Even though the compression was smaller compared to a 32.9% decline in the United States, it was much higher compared to a 17.8% decline in Japan considering the first quarter of 2009, when the Lehman Brothers failure shook global financial markets.

 

The size of Japan’s real GDP dwindled to 485 trillion yen, the lowest since April-June 2011, when Japan was still overcoming two decades of deflation and economic standstill.

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