TOKYO: Japan’s government on Thursday offered its bleakest assessment of the economy in over a decade as the fallout from the coronavirus pandemic threatens to tip the world’s third-largest economy into a deep recession.
Private consumption is “falling sharply” as the pandemic forces households to stay home, while plunging demand in key export destinations like the United States and Europe is hurting Japanese manufacturers, the government said in its monthly report for April.
“Japan’s economy is worsening rapidly and is under an extremely severe situation due to the novel coronavirus,” the report said, revising down its assessment for a second straight month.
“Economic conditions will likely remain extremely severe.”
The assessment was the bleakest the government has given since May 2009, when the global financial crisis triggered by the collapse of Lehman Brother tipped Japan into recession.
The widening fallout from the pandemic has added further pain to an economy already on the cusp of recession, with service-sector sentiment slumping to a historical low.
The health crisis was also taking a toll on the job market, which is “showing weaknesses” such as declines in job offers, the government said in the report.
The dismal assessment is likely to affect how the Bank of Japan (BOJ) describes the economic outlook when it meets for a rate review on April 27-28.
The BOJ is set to boost funding support for companies but avoid cutting interest rates, sources say, as doing so could encourage people to step out of their homes to splurge and undermine government efforts to curb the outbreak.
Prime Minister Shinzo Abe last week expanded a state of emergency to include the entire country and said the government was considering cash payouts for all to stem the coronavirus outbreak and cushion the economic downturn.
The number of infections reached 11,579 as of Wednesday with 283 deaths, according to public broadcaster NHK. – April 23, 2020, Reuters
