Japan slides into recession, forecasts worse yet to come

TOKYO (AFP) – Japan dived into its first recession since 2015, according to official data Monday, with the world's third-largest economy shrinking by 0.9 percent in the first quarter as it wrestles with the fallout from the coronavirus.

The drop in gross domestic product followed a 1.9 percent decline in the fourth quarter of 2019 as a tax hike and typhoons hit Japan hard – even before the pandemic shut down much of the economy.

A recession is defined as two consecutive quarters of negative GDP growth and some analysts predicted the Japanese economy would suffer worse as the effects of the coronavirus become clear.

"We expect the worst is yet to come, with the state of emergency in Japan and the severity of the pandemic among Western nations continuing to derail the Japanese economy," said Naoya Oshikubo, senior economist at SuMi TRUST.

Nevertheless, the first-quarter result was slightly better than economists had forecast, with expectations for a 1.1 percent decline.

Japan has been hit less hard than most advanced economies by the coronavirus, with just over 16,000 cases in the whole country and around 750 deaths.

However, authorities were concerned there could be an explosive spike – especially in the densely populated capital Tokyo – and urged people to stay indoors and businesses to shut down.

Prime Minister Shinzo Abe declared a state of emergency that was lifted last week for most of the country but kept in place for economic powerhouse regions Tokyo and Osaka. "Personal consumption has been the main casualty of the COVID-19 pandemic as consumer spending has been greatly affected by this due to people staying at home," Oshikubo said.

"But uncertainty stemming from the spread of the virus has also hit private capital investment as companies curtail their expenditure programs," added the expert.