Japan is in technical recession

By: Miguel A. Rodriguez

09:45, 14 September 2020

The pandemic pushed Japan into recession.

The world's third-biggest economy contracted 3.4% during the first trimester of 2020 reaching a technical recession. This coming after last year’s quarter performance of +6.4%. 

The measures taken by the government and by the BOJ, meaning the open-ended stimulus package, are not enough to keep the economy afloat. The future doesn’t hold any positive prospects, as analysts expect a decline during the second quarter of this year (shrinkage of 22%), which would be the biggest on record.

Japan’s situation is extraordinary, as its economy has been stagnant. The only sectors boosting the economy have been tourism, and export of goods, which accounted for 16% of the economy. The pandemic had an impact on both of these. Car manufacturing also dropped all over the world: Toyota and Honda had recorded a decrease in global sales. 

While Japan's economy will shrink by 22%, the American one is to contract more than 25%. Also, the expected quarterly decrease for USA is higher than Japan's – 4.8%. It is the most significant decline that the U.S. had since 1930.

China, which is the second economic power in the world, had an economic shrinkage of 6.8% for the first quarter of 2020.

For a country to fall into a technical recession, two consecutive quarters of contraction must be confirmed. 

Although its financial situation is difficult, its benchmark, Japan225, was not impacted by the news, and it gained 0.48% at the latest trading session.

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Sources: theguardian.com, edition.cnn.com, bbc.com

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