Japan’s economy shrank by a record 28.1% in the April-June quarter due to the economic challenges caused by the coronavirus pandemic, AP reported, citing the revised gross domestic product data released on Tuesday. This is worse than the initial estimate of a 27.8% contraction of the world’s third largest economy given last month.
The Cabinet Office said the government began keeping comparable records in 1980 and this is the worst contraction of Japan’s economy since World War II. The previous worst contraction, a 17.8% fall, was in the first quarter of 2009 during the global financial crisis.
The pandemic has especially hurt Japan’s export-reliant economy, underscoring the pressure facing the successor of Prime Minister Shinzo Abe. Last month, Abe announced that he will resign because of his deteriorating health. The new prime minister would be elected in a ruling party leadership race on September 14.
Data showed consumer spending and wages falling in July even after lockdown restrictions to tackle the pandemic were lifted in May, according to Reuters. Quarter-on-quarter, the Japanese economy contracted 7.9%, according to the revised figures, down from 7.8% in the preliminary data.
“High-frequency data show that growth is struggling to gain pace, suggesting a very gradual and protracted recovery after the initial bounce,” Oxford Economics said. “The near-term outlook therefore remains challenging.”
Chief Cabinet Secretary Yoshihide Suga, the frontrunner to become next prime minister, has indicated his readiness to boost spending. “The risk ahead is that the effect of measures taken so far, such as payouts to households, will peter out,” said Koichi Fujishiro, an economist at Dai-ichi Life Research Institute.
Last week, the Indian economy saw its worst contraction in decades, with Gross Domestic Product shrinking by a record 23.9% in the April to June quarter, reflecting the severe impact of the coronavirus-induced lockdown.