Japan’s economy hits rock bottom: worst in the last five years!
Tokyo: Japan’s economy has arrived at the worst in the last five years. It has witnessed the worst quarterly GDP contraction, along with a tax hike and a deadly typhoon overshadowing the world’s third largest economy.
The nation’s GDP has dropped off by 1.6% since September 2019; that is much before the outbreak of Coronavirus.
The quarter was marked by the rise in consumption tax from 8% to 10% while the Typhoon Hagibis killed over more than 100 people and caused flooding resulting in added disadvantage to the situation. However, it has been reported that people’s sentiment has been weaker particularly and pre-dominantly from the tax hike.
Monday’s data showed the biggest contraction since the second quarter of 2014, which was followed by a hike in sales tax from 5% to 8%. Expenditure on factories and equipment decreased by 3.7 per cent despite investments getting a boost fro m cashless-payment systems that allows consumers to alleviate the consumption tax hike. Private consumption would likely pick up from the October-December quarter but how much it will recover in the coming months would depend on the spread of the virus.
Health minister Katsunobu Kato on Sunday urged the public to avoid crowds and ‘non-essential gatherings’, including Japan's notoriously packed commuter trains, to prevent the virus from spreading. However, Naoya Oshikubo, senior economist at SuMi Trust, predicted that the new coronavirus outbreak would not impede recovery in the first quarter of 2020.
“External demands should continue to grow in Q1 2020 (first quarter of 2020) despite the outbreak of the coronavirus, which we forecast to have only a small impact on Japan's inbound tourism industry that constitutes only 0.8 per cent of real GDP," he said in a commentary ahead of the data release.
Naoya Oshikubo further added that the country is expecting to see a positive growth in the first fiscal quarter of 2020 and beyond; and also hopes an increase in the domestic consumption as the impact of higher consumption tax becomes less intense. Also, Tokyo Olympics being around the corner, they expect to see a significant positive impact on the economy.
