Japan’s economy shrank expeditiously in almost six years in the December quarter owing to last year’s sales tax hike hit and soft demand hurt to the consumer and business capital expenditure. Therefore the policymakers were under pressure to brace the growth with additional spurs. In addition, according to the analysts, in the current quarter, owing to corona virus damages to output and tourism and spreading fallout from the epidemic the world's largest economy is at state of concern. Therefore, there is probability that fears Japan may be on the edge of a recession.
In January-March, there is a quite pretty chance that economy will suffer another shrinkage. According to Executive research fellow at NLI research Institute, Taro Saito the Corona virus majorly hit inbound tourism and exports. Also it could press down on domestic consumption pretty much.
He further said that if this epidemic is not contained by the time of the Tokyo Olympic Games then the Economy will worsen at high rate. In the October-December period, Japan's Gross Domestic Product (GDP) shrank annually to 6.3%. On Monday, according to the government's data GDP has dropped to 3.7% which is first decline in five quarters and much faster than median market forecast. When consumption took a hit from a sales tax hike in April of that year, this was the biggest fall since the second quarter of 2014.
The weak data with corona virus also comes in the middle of signs of struggle in the larger regions and a broader softness in demand clouding the view point. For the financial year 2020, Singapore has decided to cut its economic growth. Also In five years, Thailand posted its slowest expansion and China's home prices increased at their slowest rate in almost two years. Japanese shares slipped on bearish prospects with both the benchmark Nikkei average and broader Topix, giving more than half a percent from the afternoon break.
Last years, the latest sales tax increase in October and also strangely warm weather that damaged sales of winter items and commodity sales considered on private consumption expecting a bigger reduction of 2.9% in five quarters as first decline. In addition, study data showed that the Capital expenditure in the fourth quarter reduced 3.7% which is much faster than a median projection for a 1.6% reduction and first declined in three quarters. Furthermore, domestic demand hit 2.1 percentage points off Gross Domestic Product growth which is more than balancing a 0.5 point input from external demand, combined.
According to a statement released by Economy Minister Yasutoshi Nishimura - said that several majors taken by the government which consist of all the important actions and was likely to affect the tourism and economy due to the outbreak of corona virus.
He further said in a statement issued after the GDP’s release that the government had hoped that Japan’s economy would continue a moderate recovery. However, there must be specific awareness where, everyone must know and must be alert regarding the effects of the coronavirus on several platforms such as domestic and external economies. However, there are several analysts having doubts if the central bank and government have operative reasons to battle leading to their declining policy.