The Japanese economy is expected to witness its worst decline since the period after the Second World War, despite the fact that the gross domestic product contracted in the first quarter less than initially thought, with global growth affected by the consequences of the Corona pandemic, which increases pressure on Tokyo to intervene to mitigate the impact on Companies and consumers.
Banks are doing their part to help as lending increased at the fastest annual pace ever in May, in a sign that companies are turning to loans to meet their urgent financing needs amid a sharp drop in sales due to the pandemic.
The interest of policymakers in the United States and Europe has shifted from responding to the crisis to efforts to boost growth, but Japan still faces difficulties in such a shift as it continues to focus on preventing another wave of disease outbreaks.
Japanese Economy Minister Yasutoshi Nishimura said in an interview that his country should focus primarily on supporting troubled companies and projects, and suggested that the central bank avoid deepening negative interest rates.
“We are not yet in the phase of stimulating consumption and encouraging people to move more. The efforts to stimulate consumption should wait for a little,” he said.
And revised data released today, Monday, showed that the third-largest economy in the world shrank by 2.2 percent year-on-year in the period from January to March, which is less than an initial reading of a contraction of 3.4 percent, with capital spending improving more than expected. Analysts had expected a contraction of 2.1 percent.
Today’s revised estimates confirm that Japan has already slipped into recession – on the basis of defining it for two consecutive seasons – for the first time in four and a half years, even before the general isolation measures to contain the disease took effect in April.
According to a series of newly released data, which includes exports, factory production and jobs, Japan is facing the worst post-war downturn in the current quarter, during which Prime Minister Shinzo Abe declared a state of emergency, asking citizens to stay in their homes and businesses and to stop and close.
Although the state of emergency was lifted at the end of May, the economy is expected to see only a modest recovery in the coming months, highlighting the heavy consequences of the pandemic.
The Japanese parliament will begin discussions today on a second supplementary budget to finance part of a new stimulus package worth $1.1 trillion that includes loan programs and a framework for pumping liquidity into distressed companies.