TOKYO: Japan’s real gross domestic product in April-June fell at an annualized rate of 27.8 percent from the previous quarter, the biggest drop in the postwar period, government data showed Monday.

Domestic economic activity slumped in the first quarter of fiscal 2020 mainly due to store closures and stay-home requests during the government’s coronavirus state of emergency between April and May.

The result was worse than the previous record drop of 17.8 percent in January-March 2009 amid the global financial crisis triggered by the 2008 collapse of US investment bank Lehman Brothers. The median forecast in a Jiji Press survey of 14 economic research institutes was for a decrease of 27.0 percent.

On a nonannualized basis, the country’s seasonally adjusted GDP fell 7.8 percent in price-adjusted terms, down for the third consecutive quarter, the Cabinet Office said in a preliminary report. The pace of decline accelerated from 0.6 percent in January-March.

In April-June, external demand also plunged as weak overseas economies dragged down Japanese exports, leaving the country without a driver of economic growth.

The quarter’s annualized GDP stood at 485 trillion yen, lower than 498 trillion yen for October-December 2012, when Prime Minister Shinzo Abe came back to power with his Abenomics economic stimulus measures.

Private consumption, which makes up over half of Japan’s GDP, shrank 8.2 percent for an annualized fall of 28.9 percent, led by drops in demand for dining, accommodation and entertainment services. It was the biggest fall since 1980, the earliest year for which comparable data are available.

Corporate capital spending declined 1.5 percent, the first fall in two quarters, due to the worsening business environment.

Overseas demand plummeted owing to lockdowns in many Western nations. Exports were down 18.5 percent, or an annualized decrease of 56.0 percent.

Consumption by foreign tourists in Japan, which is counted as exports, also took a blow from the pandemic.

In nominal terms, the country’s April-June GDP fell 7.4 percent for an annualized decrease of 26.4 percent.

“Compared with the United States and European countries, we’ve managed to limit the margin of GDP drop,” economic and fiscal policy minister Yasutoshi Nishimura said in a statement. The United States has reported an annualized real GDP drop of 32.9 percent for April-June.

Japanese economic activity, including private consumption, is recovering after the government fully lifted the state of emergency in late May.

But Takeshi Minami, economist at Norinchukin Research Institute Co., said, “The pace of recovery will be slow given the risk of resurgence of infections.”

“We can’t predict when (the economy) will return to levels before the coronavirus crisis,” he added.

JIJI Press