Japan set for deep recession after coronavirus emergency declared

Apr 09, 2020 | News On Japan

Apr 09, 2020 (Nikkei) - The declaration of a state of emergency in Japan has prompted economists to slash forecasts for three months from April to June.

Analysts from domestic and international banks now all expect an annualized double-digit contraction in the second quarter, before the Japanese economy returns to a precrisis level.

J.P. Morgan Securities forecasts the economy will shrink 17% in the quarter, BNP Paribas Securities sees a fall of 16%, and Dai-ichi Life Research Institute and Meiji Yasuda Research Institute project a contraction of more than 10%. Goldman Sachs is the most bearish, anticipating a 25% decline.

The partial lockdown looks set to plunge Japan deep into a recession -- technically defined as two consecutive quarters of contraction.

The economy shrank 7.1% in the fourth quarter of 2019 due to a sales-tax hike in October. And the average first quarter forecast of 34 private-sector economists surveyed by the Japan Center for Economic Research was for a 2.89% contraction in real terms.

The seven regions designated as areas of emergency include some of the nation's largest economic centers -- Tokyo, Kanagawa, Osaka and Fukuoka. Together they account for 46% of national gross domestic product.

While trains will keep running and roads will remain open, department stores, movie theaters and shopping malls were being shuttered on Wednesday. Economists say private consumption will be the biggest casualty as residents of the designated regions will be asked to avoid unnecessary outings and dining out with others.

SMBC Nikko Securities, an investment bank affiliated with Sumitomo Mitsui Financial Group, predicts the economy will shrink at an annualized rate of 14.8% in the April-June period from the preceding quarter.

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