The economy likely suffered its biggest contraction since 2014 at the end of last year, leaving it in a vulnerable state as fallout from China's viral outbreak threatens to turn a one-quarter slump into a recession.
A sharp drop in consumer spending after a sales tax hike is seen as the main culprit behind an annualized 3.8 percent contraction estimated by economists. The slide would be the worst for Japan since the second quarter of 2014, when a previous tax increase prompted the economy to shrink by 7.4 percent.
Economists previously viewed the expected fourth-quarter contraction as a tax-triggered blip compounded by typhoons that battered manufacturers struggling with weak export demand. But economists are now concerned the new coronavirus could delay or even derail a weak recovery forecast for early this year, an outcome that policymakers would find difficult to ignore.