Covid-19 Spurs Japan’s Economy to Shrink Faster than the Estimation

According to the Reuters’ report, Japanese economy is already worst than initially estimated in the fourth quarter as a consequence of the coronavirus outbreak that has threatened national growth and heightened recession risks.

A spike in the yen and drop in Tokyo stocks spur a damage to an economic growth together with an declining tourism and supply chain disruption caused by the virus spreading. And double hit by October’s sales tax hiked from 8% to 10%.

“Japan’s economy is already in recession and there are emerging signals that the worst has yet to come,” said Mizuho Securities senior market economist Toru Suehiro.

The economy lessen an annualized 7.1% in October-December, the biggest fall since April-June 2014 and weaker than the preliminary reading of a 6.3% annualized contraction, data showed on Monday. The reading compared with economists’ median forecast for a 6.6% fall.

Capital spending dropped 4.6% from the previous quarter, worse than a preliminary 3.7% decline and compared with the median forecast for a 4.3% fall.

Business expense is the only light amid the high-risk of recession economic, driven by investment in technology to battle against a labor shortage, however, analysts warn the coronavirus is now hurting for such spending.

Private consumption fell 2.8%, in line with the preliminary 2.9% decline, as households withheld spending after the sales tax hike.

Japanese government subjects to launch a second of an emergency measure package to stimulate an economy on March 10, including zero-interest loans to companies hit by Covid-19.

While the Bank of Japan will focus on capital expenditure as it weighs options to reduce the fallout from the widening coronavirus outbreak.

“There’s not much the Bank of Japan (BOJ) can do as monetary easing cannot cure the disease. The least the government and the BOJ can do is to prevent the negative psychological effects of the epidemic from spiraling further.” said by Suehiro.