Japan’s second quarter GDP shrinks 27.8 per cent, as virus wipes out ‘Abenomics’ gains

Japan’s second quarter GDP shrinks 27.8 per cent, as virus wipes out ‘Abenomics’ gains

  • Japan saw its sharpest second quarter contraction on record as economic activity slowed during the Covid-19 state of emergency
  • Meanwhile, Prime Minister Shinzo Abe visited a Tokyo hospital on Monday for a medical check-up, amid speculation over his health

Japan’s economy suffered a record contraction in the second quarter as a coronavirus state of emergency and lockdowns in the country’s major export markets hammered consumer spending, production and exports. A recent uptick in infections threatens to slow the recovery.The third straight quarter of declines knocked the size of real gross domestic product (GDP) to decade-low levels, wiping out the benefits brought by Prime Minister Shinzo Abe’s “Abenomics” stimulus policies deployed in late 2012.

Gross domestic product contracted an annualised 27.8 per cent in the three months through June from the previous quarter, the Cabinet Office reported on Monday, the worst on record for data going back to 1955. Analysts had forecast a 26.9 per cent decline. Until the pandemic, the economy’s worst single quarter was during the global financial crisis, when GDP shrank about 18 per cent.

The figures showed a 28.9 per cent drop in private consumption was the biggest drag on the economy, accounting for almost 60 per cent of the slide in GDP, as the virus-triggered emergency in much of April and May kept shoppers at home and prompted businesses to close. Some factory production lines were also idled as lockdowns in export markets contributed to the slide.

Business investment dropped 5.8 per cent, faring much better than analysts expected. Net exports of goods and services subtracted 3 percentage points from GDP, on a non-annualised basis.