Official figures released on Monday indicate that Japan has entered into a technical recession following dismal economic performances in the last quarter of 2019 and the first quarter of 2020. Japanese Cabinet Office said that the economy contracted 3.4 percent between January and March this year.
COVID19 has hit production, exports, and consumer spending as Japan implemented lockdown measures in early March. The situation may worsen as a state of emergency in April devastated supply chains and businesses. More concrete data on industries and businesses will become available in the second quarter.
The Japanese government has set aside $1 trillion stimulus package to cushion against the economic impacts of the pandemic. The Bank of Japan (BOJ) lifted the ceiling on government bond purchases as the government ramped up spending. BOJ has cut rates and will introduce lending to small businesses. The government is working on a second stimulus budget to support the economy.
Japan’s automakers Toyota and Honda and manufacturers have recorded a slump in exports with car sales falling 10.1%.
The situation is not unique to Japan as recession looms in major economies due to mounting uncertainty on the end of the pandemic. China recorded a 9.8% decline in the three months with the US contracting 4.8% over the same period. Germany, Eurozone largest economy, slid into a recession following a 2.2% contraction in the three months to March.
A technical recession occurs when a nation experiences two consecutive quarters of falling GDP.