The coronavirus pandemic has already taken its toll on Japan as the country falls into recession. This is the first time Japan has struggled financially since 2015, and unfortunately, things are continuing to escalate.
Japan's recession
Japan is known to have the third biggest economy in the world, and it shrank 3.4% in the first three months of 2020. The pandemic has hurt the global economy, with an estimated cost of $8.8tn or £7.1tn. Just last week, Germany also fell into recession as major economies in the world face the impact of lockdowns and closed businesses.
The difference between Germany and Japan is that the latter did not go into national lockdown, but the country issued a state of emergency in mid-April and it affected businesses and supply chains since Japan is reliant on trade.
Aside from the 3.4% fall in growth domestic product or GDP for the first three months of the year, Japan also suffered from a 6.4% decline during the last three months of 2019, and this pushed the country into a technical recession.
Japanese consumers have also been hit by the impact of the pandemic and a sales tax hike in October that went from 8% to 10%. Even though the country lifted the state of emergency in 39 prefectures, its economic outlook is still gloomy for the current quarter. Reuters polled analysts and shared their insight on the matter.
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They expect Japan's economy to decrease to 22% from April to June, which is the second quarter of the year, and it will be the biggest economic decline in the country's record. To help combat this, the Japanese government announced a $1 trillion stimulus package, and the Bank of Japan also expanded its stimulus measures for the second time since April.
Japanese Prime Minister Shinzo Abe has also pledged to fund new spending measures, and it is said to be the second budget to be released this month, as it is the government's attempt to soften the economic blow of the coronavirus pandemic.
How can Japan recover?
The economy of Japan has been stagnant for years, compared to the buoyant economies of other developed countries like China and the United States. Japan relies on trading and has almost no control over demands in other countries. Some of the biggest brands from the country are Toyota and Honda and both have declined sales around the world.
Tourism has been hit hard by the pandemic, and it has been one of the economic boosters of Japan. Unless both trading and tourism have recovered, it will take time before Japan can turn things around. The country has more than 16,000 confirmed cases and more than 700 deaths.
Japan vs. other major economies
Japan may have fallen into recession, but the country's economy appears to be doing so much better or at least less bad, than other developed countries. Even though analysts predict that Japan's economy will fall to 22% from April to June, they also predict that the United States could fall to 25%.
The first three months of Japan's economy fell 3.4% but it is a lot better than the 4.8% decrease in the economy of the United States. This was the fastest decline for the US economy since the Great Depression of the 1930s.
China, which has the second-largest economy in the world, fell 6.8% in the first three months of the year, compared to Japan's 3.4% decline. Although China and the US are still to confirmed if they have fallen into a technical recession, analysts say that it is just a matter of time until the two countries declare it.
