World

Coronavirus: Japan on verge of collapse of recession as outbreak affect bites | Industry Information


The Japanese economy shrank at its fastest pace in more than five years at the end of 2019 – putting it on the brink of recession as the impact of the coronavirus begins to bite.

Official figures showed gross domestic product (GDP) declined by 1.6% in the last quarter, equivalent to an annual pace of 6.3%.

The sharp contraction in the world’s third biggest economy was blamed on a sales tax hitting consumer and business spending as well as the impact of a major typhoon.

Analysts say the coronavirus outbreak could take a further toll.

If GDP falls for a second successive quarter the economy will be in recession.

Taro Saito, executive research fellow at NLI Research Institute, said: “There’s a pretty good chance the economy will suffer another contraction in January-March.

“The virus will mainly hit inbound tourism and exports, but could also weigh on domestic so consumption quite a lot.

“If this epidemic is not contained by the time of the Tokyo Olympic Games, the damage to the economy will be huge.”

The fourth quarter slump was much bigger than experts had predicted, and the biggest since the second quarter of 2014.

Japan’s Nikkei index fell 0.7% on the figures.

It comes amid signs that other countries in the region are struggling with the impact of the coronavirus.

Thailand has posted its slowest expansion in five years and Singapore cut its growth projection for 2020 – the latter country also flagging a recession risk.

China’s interconnectedness with the global economy means factory and store shutdowns in the country are having repercussions around the world.

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Last week, JCB became the first major UK manufacturer to reveal that it was cutting production at its factories because it expects that the outbreak will reduce the availability of parts from suppliers in China.

However, stock markets, which initially fell sharply because of the virus, have since become more bullish despite its continued spread.

That is partly due to stimulus measures such as China’s central bank cutting interest rates to try to cushion the economy from the blow to the economy caused by COVID-19.

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