Recession is just around the corner for Japan

Recession is just around the corner for Japan

After a partial lockdown, a suite of stimulus packages it seems that nothing can help the economy. Japan is in a difficult situation.

At the beginning of the month, Prime Minister Abe declared a state of emergency applicable for seven prefectures only. Measures are in force until May 6. Moreover, a stimulus package worth $990 billion was approved to ease the economic impact of the novel virus.

BOJ will sell trillion-Yen worth of bonds to fund the package. The stimulus measures include 6 trillion Yen worth of cash for handouts to small businesses and poor households. Another 26 trillion Yen will go to tax deferrals. The stimulus consists of two phases: during the first one, bankruptcies and job losses will be avoided, and in the second phase is for stimulating the economic rebound.

The first phase reserved funds that represent less than 1% of the country’s GDP. It is a good idea as it will help the businesses to stay afloat and avoid an increase in the number of bankruptcies.

The stimulus package represents 20% of the GDP, and it’s the most significant one ever released by Japan.

Japan is known for large expenditures during a crisis but is no expert in kick-starting economic growth. During the 2008-2009 crisis, the economy contracted by 6.5%, although the government released a stimulus worth 14% of the GDP.

As per the last BOJ meeting, more measures came into force. The ETF purchase power doubled to $111 billion. For the next BOJ meeting, analysts expect alternative solutions to help the economy. Speculations about it circle around with some saying that the purchase of corporate bonds will increase, as well as one of the numbers of assets the bank will accept as collateral in exchange for loans.

More than $600 million worth of stocks, bonds, Dollar loans and so on, went to the bank during the first quarter of 2020.

Experts think that the 2020 economic growth will shrink by 5%, forcing Japan into recession.


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Sources: yahoo.com, businesstimess.org, reuters.com, economics.rabobank.com

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The information presented herein is prepared by CAPEX.com and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only and as such it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

Therefore, Key Way Investments Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance is not a reliable indicator of future results.