Japan recession fears grow
The country suffers a shock Q4 GDP plunge in its second-worst financial quarter since the global financial crisis of 2008/09
Japan is widely expected to enter into a recession at the end of the current financial year, thanks to the ongoing coronavirus epidemic and a shock GDP plunge in the fourth quarter of 2019.
Although economists had predicted a fall in gross domestic product, the 6.3 per cent drop at an annual rate far surpassed their average prediction of 3.8 per cent.
This made the three months through to the end of December Japan’s second-worst financial quarter since the global financial crisis of 2008/09. It even outdid the drop triggered by the earthquake and Fukushima nuclear disaster of 2011.
Japan’s economy had struggled with persistent typhoon disruption, an unpopular consumption tax rise and the consequences of the US-China trade war. Between 1991-2010, following the collapse of an asset price bubble, Japan endured a period of economic stagnation known as Ushinawareta Nijūnen or "the lost 20 years".
While the so-called Abenomics of prime minister Shinzo Abe have triggered some growth in the past decade, Japan is still caught in a cycle of low interest rates and vainglorious government stimulus packages.
This second-worst quarter of Shinzo Abe’s premiership came despite another wide-ranging stimulus package. With the coronavirus epidemic all but ensuring two consecutive quarters of negative growth, the prime minister may be set for yet another round of stimulus.
A recent survey by the newspaper Yomiuri reported a 5 per cent fall in approval for Abe’s cabinet compared with the previous month. There is growing criticism of the government’s perceived soft policy towards Chinese visitors.
Whereas other countries have issued blanket bans on visitors from China, Shinzo Abe has opted to only restrict foreigners who have visited epicentres, such as Wuhan. While the prime minister does not want to alienate or deter business with Japan’s largest trading partner, other parties have called for a complete ban owing to the severity of the outbreak.
Despite the shock Q4 plunge, the pound to yen exchange rate remains relatively unchanged at ¥143.01, well within the monthly range of ¥141.00 and ¥144.43.
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