Japan’s economy shrinks at fastest rate in five years
Japan and Singapore teetered on the brink of recession today after a poor end to 2019 was compounded by the coronavirus threat to the countries’ tourism industries and supply chains.
Japan’s economy shrank at its fastest rate in five years at the end of 2019, it was revealed today. GDP fell 6.3 per cent in October to December, a much sharper fall than expected.
A sales tax rise from eight to 10 per cent and the major Typhoon Hagibis both struck the country in October amid dampened global demand for goods.
The US-China trade war also took a toll as exports slipped 0.1 per cent, while capital spending fell 3.7 per cent.
“This was the first economic contraction since the third quarter of 2018, the sharpest shrinkage since the second quarter of 2014 and didn’t even take into account the impact of the coronavirus,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said.
And the coronavirus outbreak has now raised concerns that the economic slowdown could drag on into the first quarter of 2020 and push Japan into recession.
The Nikkei dropped 0.84 per cent as traders sold off Japanese shares on the back of the disappointing GDP figures.
“We had the sales tax increase in the quarter as well as the super typhoon but this was still a pretty bad number,” Deutsche Bank’s Jim Reid said.
The coronavirus epidemic led Singapore to cut its growth outlook for 2020 from two per cent to between minus 0.5 per cent and 1.5 per cent, down from 0.5 per cent to 2.5 per cent.
Travel restrictions put in place to stem the spread of Covid-19, the new strain of coronavirus, has led to fewer Chinese tourists visiting Japan.
And China has been forced to shut down factories, disrupting global supply chains. Nissan recently shut a Japanese factory due to a lack of Chinese car parts.
Economy minister Yasutoshi Nishimura responded to the figures by saying the government would take any necessary steps to counter the coronavirus epidemic’s knock to the economy.
The coronavirus death toll now stands at 1,770 in China, with the country’s confirmed cases now at 70,548.