Japan said Monday its economy contracted more than initially believed in the October-December quarter, reflecting the country’s economic fragility even before the new coronavirus outbreak began to threaten global growth.
The gloomy revised figures led economists to project that Japan is headed for its first recession since 2012, with the viral outbreak seen depressing exports.
The country’s gross domestic product for the October-December quarter was revised down to a contraction of 1.8 percent, dropping further from the 1.6 percent contraction estimated in February.
The fall was also sharper than a 1.7 percent contraction estimated by private economists, according to a survey by the Nikkei business daily.
The latest estimate tracked a contraction during the April-June quarter of 2014 after the government raised the consumption tax from five to eight percent.
The tax was raised again, to 10 percent, in October of last year, despite fears of its economic impact. The last quarter also saw a series of natural disasters including typhoons that caused widespread flooding.
The nation logged a larger-than-expected fall in non-residential investments that pushed overall domestic demand to shrink by 2.3 percent, rather than the fall of 2.1 percent estimated earlier, according to the Cabinet Office.
And Japan faces a difficult path ahead, with the global virus outbreak expected to depress growth at home and abroad, particularly pressuring exports.
“Unfortunately, any recovery in Q1 has been nipped in the bud by the global spread of the coronavirus,” said Tom Learnmouth, Japan economist at Capital Economics.
“We have pencilled a 0.5-percent quarter-to-quarter contraction in GDP this quarter,” January through March, he said, raising the possibility of a recession.
“That’s likely to be primarily driven by plunging export volumes,” he said.
Consumer spending will also be “hit hard” with many people staying at home to avoid the virus, following calls from Prime Minister Shinzo Abe for the public to cancel unnecessary outings while schools across the nation were requested to shut for most or all of March.
“We think Japan’s GDP will shrink by 1 percent across 2020,” Learnmouth added.