Japan on Monday reported its worst drop in GDP on record, with its economy shrinking a record 7.8% from April to June as the coronavirus pandemic severely slowed economic activity in the country.
The decrease translates to an annual rate of decline of 27.8%, the worst quarter the world’s third largest economy has recorded since they began keeping track in 1980, and the third consecutive quarter of contraction.
“In April, May, a state of emergency was issued, it was a situation where the economy was artificially stopped so to speak, and the impact was severe,” said Yasutoshi Nishimura, minister Economic and Fiscal Policy.
“These are tough numbers but they bottomed out in April and May, we would like to put all our efforts into returning to a growth trajectory,” Nishimura said.
From April to June, Japan’s exports dropped at an annual rate of 56 percent, while private consumption decreased at an annual rate of nearly 29% as shoppers stayed home.
Taro Saito, an economist at the NLI Research Institute, told the New York Times it would take at least three years for Japan’s economy to return to pre-pandemic levels.
While Japan’s economy was the first among major nations to fall into recession when the pandemic hit, the country performed better than other major economies in the April-June period, when the United States and Germany both recorded 10% falls over the previous quarter and British output declined 20.4 percent.
Japan, which has recorded 55,426 confirmed coronavirus cases and 1,101 virus-related deaths, never instituted a full lockdown, as the authorities there do not have the legal power to force people to stay home. However, economic activity slowed as workers and consumers chose to stay home.
The economy began to rebound late in the second quarter as the country’s national emergency ended in May and people returned to work. The country then also began to feel the effects of an economic stimulus package worth 40 percent of its GDP which included cash handouts and zero-interest loans.
The stimulus helped keep unemployment and bankruptcies low and in June, as the virus waned, the government began a campaign to encourage domestic travel and restart the local tourism industry. Then, in July, case numbers began to rise again, prompting criticism that the government had re-opened too quickly.
Prime Minister Shinzo Abe said earlier this month that the country’s economy could not afford a second national emergency and that he was dedicated to avoiding one.
Meanwhile local governments have declared emergencies on their own. Tokyo’s government has asked restaurants and bars to close by 10 p.m. as the city has reported more than 200 new cases a day for the past month.