Published: Tue, February 18, 2020
Economy | By

Japan's economy shrinks at fastest pace in six years, virus clouds outlook

Japan's economy shrinks at fastest pace in six years, virus clouds outlook

Japan's economy lurched towards a possible recession after taking another battering from a sales-tax hike in the last quarter that left the economy shrinking at the fastest pace in almost six years - even before the coronavirus outbreak.

"There's a pretty good chance the economy will suffer another contraction in January-March".

"If this epidemic is not contained by the time of the Tokyo Olympic Games, the damage to the economy will be huge", he said.

Gross domestic product (GDP) fell an annualized 6.3 percent in the October-December period, faster than a median market forecast for a 3.7 percent contraction, data released by the government showed on Monday.

Beijing stepped up its efforts to revive the Chinese economy on Monday as it struggles to cope with disruption caused by the coronavirus by cutting interest rates for banks and pledging to reduce taxes to counter the slump taking hold.

Japan introduced the consumption tax in 1989, then bumped it to 5% in 1997 and 8% in 2014.

Singapore cut its economic growth projections for 2020, Thailand posted its slowest expansion in five years and China's home prices rose at their weakest pace in nearly two years.

Both exports and imports fell during the quarter.

Meanwhile the United Kingdom will outpace only Italy and Japan among the major economies, after Moody's held its projections of Britain's GDP growth for this year and 2021 at 1%.

Japan's economy shrinks at fastest pace in six years, virus clouds outlook - The Jakarta Post

By comparison, America's analogous measure of GDP was a positive 2.1 percent, as the record-long expansion continues with few apparent hiccups into its 11th year.

Economy Minister Yasutoshi Nishimura said in a statement: "We will keep paying careful attention to the virus' effect on tourism and the wider economy".

Worries about the spread of the coronavirus and its hit to the global economy kept Japanese manufacturers' mood gloomy in February, a Reuters poll found.

Investors are now watching to see whether the economy will rebound after the coronavirus forced China to shut down factories and led to a big drop in Chinese tourists visiting Japan.

At this stage, it is hard to gauge the ramifications of the outbreak on Japan's economy, many experts say.

Still, many analysts doubt whether the government and the central bank have effective means to fight another recession given their dwindling policy ammunition.

"There's not a lot more the BOJ can do either".

It has also highlighted the vulnerability of the Japanese economy to external shocks just as worries have somewhat eased over the Sino-U.S. trade war and Britain's exit from the European Union.

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