Japanese economy contracted by 5.1% over the last quarter

The Japanese economy shrunk at an annual rate of 5.1% in January-March. Reduced spending due to the Covid-19 pandemic hit the economy hard, contracting it more than expected, as the government data released on Tuesday showed. According to the Cabinet Office’s preliminary seasonally adjusted GDP report, household consumption tumbled down at an annualized rate of 5.6%, with government spending plummeting down by 6.9%.

Almost whole Japan has remained under a state of emergency thus far due to the coronavirus. The government issued early closures of restaurants and bars to hinder the spread of the virus at places where crowds gather. However, Japan had one of the slowest Covid-19 vaccine rollouts in the developed world. Coronavirus illnesses and deaths have been rising in the country despite various restrictions. Only 4% of the population has gotten at least one shot thus far.

Japan’s GDP plunge over the last fiscal year surpassed the global financial crisis, proving the worst since the end of World War II.

How much time will Japan require to recover?

The world’s third-largest economy managed to rebound in the last two quarters slightly. It is slowly recovering from earlier pandemic damage. According to the reports, the economy grew by 2.8% in October-December, compared to the previous quarter. It also expanded by 5.3% July-September on-quarter. However, it had decreased in April-June by 8.1%. These rates are compared to the last quarter.

For the latest quarter, the contraction on the quarter was 1.3%. Overall, Japan’s economy declined by 4.7% for the 2020 calendar year. That was the first year of contraction in 11 years, as the Cabinet Office stated. In 2019, economic growth was flat.

The latest results were slightly worse than what economists had expected, showing the negative effects of restrictions on movement during the pandemic – noted Robert Carnell, Regional Head of Research Asia-Pacific at ING. He added that the prospects for growth in the rest of 2021 are looking much weaker.