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Japan on brink of recession as coronavirus impact bites

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Japan on brink of recession as coronavirus impact bites

The Japanese economy shrank at its fastest pace in more than five years in late 2019 – putting it on the brink of recession as the impact of the coronavirus begins to bite.

Official figures showed that gross domestic product (GDP) declined 1.6% in the last quarter, equivalent to an annual rate of 6.3%.

The strong contraction in the world's third largest economy was attributed to a sales tax that hit consumer and business spending, as well as the impact of a major typhoon.

Analysts say the coronavirus outbreak could come at an additional cost.

If GDP falls for the second consecutive quarter, the economy will be in a recession.

Taro Saito, executive researcher at the NLI Research Institute, said: "There is a good chance that the economy will contract again between January and March.

"The virus will mainly affect incoming tourism and exports, but it can also weigh on the domestic market, so consumption is quite high.

"If this epidemic is not contained at the time of the Tokyo Olympics, the damage to the economy will be enormous."

The fall in the fourth quarter was much greater than experts had predicted, and the biggest since the second quarter of 2014.

Japan's Nikkei index fell 0.7% in the numbers.

This comes amid signs that other countries in the region are struggling with the impact of the coronavirus.

Thailand recorded its slowest expansion in five years and Singapore cut its growth forecast for 2020 – the latter country also signaling a risk of recession.

China's interconnection with the global economy means that plant and store shutdowns in the country are having repercussions around the world.

Last week, JCB became the first major UK manufacturer to reveal that it was cutting production at its factories because it expects the outbreak to reduce the availability of parts from suppliers in China.

However, stock exchanges, which initially fell sharply because of the virus, have become more optimistic, despite their continued spread.

This is due in part to stimulus measures, such as China's central bank, cutting interest rates to try to cushion the economy from the blow to the economy caused by COVID-19.

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