Japan braces for worst postwar economic slump

• Japan’s economy braced for its worst postwar slump even as first- quarter GDP contracted less than initially thought, as the coronavirus crisis slams the brakes on global growth and raises pressure on Tokyo to cushion the blow to business and consumers.

Banks are doing their bit as lending rose at the fastest annual pace on record in May, a sign firms were tapping loans to meet funding needs to survive slumping sales from the pandemic.

While U. S. and European policy- makers have shifted from crisis-response to efforts to prop up growth, Japan is struggling to do so as it continues to focus on preventing a second wave of infection.

In an interview with Reuters, economy minister Yasutoshi Nishimura said Japan should primarily focus on backstopping faltering businesses, suggesting the central bank should avoid pushing interest rates deeper into negative territory.

“We’re not at a stage yet where we want to stimulate consumption and encourage people to travel a lot. Efforts to stimulate consumption should wait a bit more,” he said, when asked whether the Bank of Japan should take steps to boost demand, such as deepening negative interest rates.

The world’s third- largest economy shrank an annualized 2.2 per cent in January- March, revised data showed on Monday, less than the 3.4- per- cent contraction indicated in a preliminary reading, as capital expenditure fared better than expected. Analysts had tipped a 2.1-per-cent contraction.

But few analysts were hopeful about the outlook for the year since capital spending data used to calculate the revised figures lacked enough responses — most struggling firms appear not to have participated in the survey — and will be updated in July.

On the whole, Monday’s revised GDP estimate confirmed Japan had slipped into recession — defined as two straight quarters of contraction — for the first time in 41/2 years, even before lockdowns to contain the virus were put in place in April.