Japan’s economy set for marginal recovery in H2 2020, after record dip in real GDP in Q2 2020, says GlobalData

Following the news that Japan’s economy has contracted by 7.8% in the April-June 2020 quarter, the sharpest economic slump on record in the country’s modern history;

Gargi Rao, Economic Research Analyst at GlobalData, a leading data and analytics company, offers her view:

“The global pandemic has led most developed countries to revise down their real GDP growth estimates for FY2020. Japan, the third-largest economy after the US and China, is not an exception as the country reported third consecutive quarterly decline due to slump in exports and subdued domestic demand conditions.

“Decreasing global demand, supply chain disruptions, poor consumer confidence, declining export demand due to trade restrictions and natural calamities resulted in the deterioration of the economic activities in the second quarter. Export sector was worst hit with 18.5% (QoQ) decline in the second quarter from the previous quarter decline of 5.4%. Private consumption also shrunk 8.2% (QoQ) in Q2 vis-à-vis 0.8% dip in Q1 2020.

“However, the easing of restrictions from June resulted in marginally better performance of PMI- manufacturing and services along with some improvement in consumer confidence.

“By the end of second quarter, the massive stimulus packages of worth US$2.17 trillion resulted in the rebound of economic activities. Policies were aimed at cash handouts to individuals and affected firms, deferral of tax payments and social security contributions, and concessional loans from public and private financial institutions.

“Japanese economy is set for a marginally better performance in the next two quarters, largely driven by workers who resumed their work; and opening up of business activities. However, potential risk to the economic growth prospects emanate if the resurging COVID-19 cases are not controlled in a timely manner.”

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