Japan GDP Shrinks a Massive 6.3% Annualized in Q4 (Without Even Being a Target of Sanctions)
Japan GDP Shrinks a Massive 6.3% Annualized in Q4 (Without Even Being a Target of Sanctions) by Akane Okutsu for Anti-Empire
Meaning 2019 was a contraction year, as is likely for 2020
A sales-tax hike and destructive typhoon plunged Japan’s economy into itsbiggest contraction in five years in the final quarter of 2019. Now, the novel coronavirus outbreak is threatening a return to growth.
Gross domestic product for the world’s third-biggest economy shrank an annualized 6.3% from a quarter earlier, according to data released by the Cabinet Office on Monday.
Consumer spending fell 11.1% after the national sales tax was raised in October to 10% from 8%. During the same month, Typhoon Hagibis ravaged a large swathe of the country.
Capital spending declined 14.1% and exports slipped 0.4% due to the fallout from the U.S.-China trade war.
But uncertainty over the impact of the virus outbreak has cast a shadow over the economy, especially with China’s slowdown expected to worsen.
“The sharp drop in output after October’s sales tax hike supports our view that Japan’s economy will shrink this year,” Capital Economics wrote in a note after the data was published. “But after today’s release, our forecast of a 0.2% drop in GDP in 2020 looks optimistic.”
Other economists warned the longer the virus continues to infect people, the more the risks to Japan’s economy will grow.
“While real GDP could rebound somewhat in January-March from the sharp negative growth in October-December, growth is likely to be sluggish, with the negative impact of the novel coronavirus having a negating effect,” said Naohiko Baba, Goldman Sachs’ chief Japan economist.
“A larger risk is domestic consumption, particularly the negative ripple effect on nonessential, non-urgent discretionary spending, such as services,” Baba added. “We see a need to carefully monitor the situation, since the negative impact could worsen if the number of domestic cases increases and the problem becomes prolonged.”
The Japanese government was a little more upbeat.