Business / Economy

Japan downgrades assessment of economy to 'getting worse rapidly'

Kyodo

Japan’s economy has been “getting worse rapidly” in April due to the global coronavirus pandemic, the government said Thursday, downgrading its key assessment for the second straight month.

It is the first time since May 2009, in the aftermath of the global financial crisis, that the Cabinet Office has used the term “worse” or “worsening” in its monthly report to describe the health of the Japanese economy.

“The Japanese economy is getting worse rapidly in an extremely severe situation,” the report said, revising the assessments of industrial output, private consumption and another four of the 11 main components.

As for short-term prospects, it said the economy is expected to continue to face the same situation because of the fallout from the pandemic, warning that close attention should be paid to “further downside risks” with global financial markets volatile since the virus was first detected in China late last year.

The report for March said the economy was “in a severe situation, extremely depressed by the novel coronavirus” and stopped short of using the term “recovering” for the first time since July 2013.

In the latest report, the government lowered the assessment of industrial production for the first time in four months, saying it is “decreasing” rather than it “remains in a weak tone” as stated in the previous month.

A government official told reporters that automakers especially are expected to see a sharp fall in production in April on the back of slowing demand, supply chain disruptions and factory suspensions.

With many Japanese people refraining from going out except for essential reasons following government requests to stay at home, the Cabinet Office said private consumption is “decreasing rapidly,” compared with it has been “showing weakness recently” in the March report.

In particular, declining consumer spending on food services and trips has been noticeable, according to the official.

The assessments of exports, corporate profits, firms’ judgments regarding current business conditions and the employment situation were also revised down.

As there are no signs of the global disruption caused by the pandemic subsiding any time soon, the Japanese economy, highly dependent on exports, is projected to contract by 5.2 percent in 2020 from a year before, its worst downturn since 2009 at the height of the global financial crisis, according to a report released by the International Monetary Fund last week.

In the October-December period last year, Japan’s economic growth shrank an annualized real 7.1 percent as the consumption tax rate hike from 8 percent to 10 percent in October dented private spending.

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