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Tuesday, June 22, 2021

Historic “dip” in the Japanese economy in the second quarter

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Data released today reveal the sharpest drop in Japan’s GDP since comparable data began to be collected in 1980

Japan’s GDP collapsed, shrinking by 7.8% on a quarterly basis or by 27.8% on an annual basis, in the quarter between April and June, making an already historic dip due to the impact of the coronavirus pandemic. This is the third consecutive quarter of contraction of the third-largest economy in the world.

The decline, based on still preliminary data released today by the Japanese government, follows its contraction in the first quarter (by -0.6%, instead of -0.9% which was the initial estimate in May) and the fourth quarter of 2019 (-1.9%), which had already marked the entry of Japan into recession from a technical point of view.

This is the first recession in the Japanese economy since 2015.

Recession is defined as the contraction of national wealth by at least two consecutive quarters. Data released today reveal the sharpest drop in Japan’s GDP since comparable data began in 1980. Economists polled by Bloomberg News expected the Japanese economy to shrink slightly in the second quarter (-7.5%).

The archipelago economy, which was already suffocating in the fourth quarter of 2019 due to the VAT increase in October, began to suffer from the impact of the coronavirus pandemic in the first quarter of 2020.

In the second quarter, the activities suffered a further blow, as a state of emergency came into force between April to May. Household consumption decreased by 8.6% during this period (this is a record), while corporate investments in fixed assets by 1.5%.

Foreign trade also went into hibernation, with Japan’s exports shrinking by 18.5% and imports by 0.5%.

However, public investment, which declined in the first quarter, increased by 1.2% in April-June.

With around 54,000 reported cases of SARS-CoV-2 infection and about 1,000 deaths from COVID-19, Japan is suffering less from the coronavirus pandemic than the US and EU member states are feeling and also their economies.

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