Japan’s latest recession lasted for 19 months through May last year when the economy was experiencing the worst slump on record due to the initial impact of the coronavirus pandemic, a government panel concluded Tuesday.
A Cabinet Office panel of economists, which retrospectively determines the length of an economic growth and contraction, said in its provisional assessment that the latest shrinkage of the world’s third-largest economy started in November 2018 when its exports bore the brunt of an escalating U.S.-China tariff war.
In the April to June period of 2020, the Japanese economy contracted an annualized nearly 30% from the previous quarter, the sharpest such shrinkage on record, as the government’s first state of emergency declaration over the virus spread covered the whole nation for about a month from mid-April.
The emergency entailed requests for people to stay at home and nonessential businesses to temporarily close, although they were nonbinding. In addition, hard lockdowns in many major cities abroad hit exports of Japan-made products such as cars.
“Since people were asked to refrain from going out during the Golden Week holidays (from late April to early May), consumption was curbed,” Hiroshi Yoshikawa, president of Rissho University who chairs the panel, said during a news conference.
The economy was also greatly affected by a consumption tax rate hike from 8% to 10% on Oct. 1, 2019, which dampened consumer spending that accounts for more than half of the nation’s gross domestic product.
Looking at the coincident index of business conditions calculated every month by the office, the figure dropped 30.1% in the 19 months until May last year. But it was smaller than a 32.3% fall seen in the 13 months through March 2009 in the aftermath of the global financial crisis.
“The latest economic slump was characterized chiefly by a plummet in consumption and differed from the recession seen during the financial crisis when the country was most affected by a plunge in exports,” said Yoshikawa.
Technically, Japan would have been in an economic expansion phase since May last year, he added, but the economy has remained sluggish even after the lifting of the first virus emergency due to the virus resurgence, with the GDP level yet to reach pre-pandemic levels.
The government announced earlier last month that Japan’s GDP in the July to September period shrank an annualized 3.0%, the first contraction in two quarters, amid a resurgence driven by the delta virus variant as well as a global chip crunch that took a heavy toll on car exports.
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