Japan Spirals Into Recession Amid Coronavirus Pandemic
Japan has now spiralled into a recession for the first time in four and a half years as COVID-19 lockdowns suffocate business activity. The Bank of Japan (BOJ) will have an emergency meeting on May 22, 2020, to discuss distributing more money into the economy to target small businesses, with an aim to prevent the coronavirus from pushing the economy into a deeper recession. Tokyo fears that if more credit is not pumped into the economy, the nation will lead to a further spike in job losses and bankruptcies.
Furthermore, Japan’s exports have seen the biggest fall since the global financial crisis as supply chains are disrupted and demand falls amid the worldwide pandemic. In April, the Ministry of Finance provided data that exports fell 21.9% on a year-on-year basis. Additionally, shipments to the U.S fell 37.8%, which was the fastest decline since 2009, while car exports to the U.S. have fallen 65.8%.
Unfortunately, as China is Japan’s largest trading partner, the lockdowns proposed by both nations have crippled exports which fell 4.1% in April- with medicines, chemical materials and car parts experiencing the largest slump in demand. Japan’s GDP slumped 3.4% in the first quarter which is marginally less than the retraction of 7.3% seen in the October to December quarter- these two consecutive quarters consequently meet the technical definition of a recession. More broadly speaking, unemployment rates rose to 2.5%, which is relatively low in comparison to other countries given the current global crisis. In terms of coronavirus cases, the latest statistics show that Japan has 16,424 cases of COVID-19 and 777 reported deaths after recording 39 new cases and six recent deaths.
More than half of Japan’s $5 trillion economy comes from private consumption which has seen a reduction of 0.7% between January and March. Additionally, well-renowned automaker company, Toyota, reported that it would cut its production for domestic vehicles by 122,000. As a result, Toyota is predicting to experience its lowest operating profit in nine years- or a drop of 80%. The Japanese government has already declared that it is providing a record $1.1 trillion stimulus package while the BOJ expanded its stimulus in April for the second consecutive month. A second stimulus package has also been pledged for the end of May to target alleviating the economic blow from the pandemic.
Sadly, many people believe that these stimulus packages are too little and have arrived too late. The economy will take up to two years to fully recover, which supports reason to believe that further government stimulus will still be needed until the country recovers. Fortunately, Japan can be highly praised for its approach to preventing the spread of the virus by its lockdown measures. Consequently, it has now lifted its state of emergency in 39 of the 47 prefectures.
By Caroline Wong
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