The government on Thursday maintained its assessment of the Japanese economy in May, saying that it is “worsening rapidly” as the new coronavirus pandemic curbs economic activities.
“The Japanese economy is worsening rapidly in an extremely severe situation due to the novel coronavirus,” the Cabinet Office said in a monthly report, leaving unchanged an expression that constitutes its most pessimistic assessment of the overall situation since May 2009 in the aftermath of the global financial crisis.
Out of 11 main components, the May report downgraded the assessments of three, including exports.
The government maintained its overall assessment after downgrading it in March and April.
But despite the bleak overall outlook, positive signs appeared as the assessment of imports was upgraded for the first time since December 2017. The report said they are “gradually bottoming out” following the resumption of companies’ activities in China, where the pandemic first started.
The report also said in its assessment of short-term prospects that social and economic activities “will be resumed gradually,” although the tough circumstances are “expected to remain.”
“Our recognition of the current situation is still severe, but it’s possible that domestic demand will pick up from rock bottom in April and May if things go well,” a government official told reporters, as the country began to see a downward trend in new infection cases.
Last month’s report said close attention should be paid to “further downside risks,” but the government eliminated the phrase this time, the official said, referring to the recent lifting of a state of emergency in Japan.
On Monday, restrictions on economic activities in Tokyo and four other prefectures — the last regions under the state of emergency — were eased as the emergency declaration was lifted a week earlier than the initially scheduled May 31.
Other than exports, the government also lowered the assessment of business investment, saying it has been showing “a weak tone recently” after having described it as “almost flat” in the previous month.
The employment situation was also revised down, with the report saying it “shows some further weak movements,” although the country’s unemployment rate stood at a relatively low 2.5 percent in March.
The assessments of components such as private consumption, industrial production and corporate profits were maintained.
The state of emergency was first declared on April 7 for Tokyo, Osaka and five other areas, which then had relatively large numbers of COVID-19 cases. It was expanded nationwide nine days later, dealing a huge blow to the world’s third-biggest economy.
Last week, government data showed that the Japanese economy in the January to March period shrank an annualized real 3.4 percent from the previous quarter, a significant contraction for a second consecutive quarter that pushed the country into a so-called technical recession.
The nation’s gross domestic product is widely expected to post an additional 20 percent plunge in annualized terms in the April to June period, but to rebound to some extent in July to September.