TOKYO: The Japanese government Thursday downgraded its basic economic assessment for the first time in three months, saying the economy is in “severe” situation amid the coronavirus crisis.
“The Japanese economy is in severe situation, extremely depressed by the novel coronavirus,” said the monthly economic report for March compiled by the Cabinet Office and submitted to a meeting of economic ministers.
The previous February report said the economy was “recovering at a moderate pace” despite increased weakness among manufacturers that reflected sluggish exports.
The word “recover” disappeared from the government’s economic assessment for the first time since June 2013, a danger signal for the Japanese economic expansion powered by Prime Minister Shinzo Abe’s “Abenomics” reflationist policy measures.
“Now it’s hard to say the economy is in a recovery phase with no end in sight for the coronavirus outbreak,” a Cabinet Office official said.
But “it’s still too early to judge whether Japan has entered a recession phase,” the official added. He declined to say whether the economic expansion phase since December 2012, described as Japan’s longest in the postwar period by government officials, has ended.
In the latest report, the Cabinet Office downgraded its view on seven of the 14 surveyed sectors, including business sentiment, capital expenditures and corporate profits.
Private consumption “is showing weakness recently,” the government said after seeing a pickup last month. The virus spread led to weak department store sales to foreign tourists and Japanese shoppers.
The government also revised down its view on imports, as shipments from China slumped on supply constraints caused by the COVID-19 crisis in the country.
Looking ahead, the report said that “severe situation is expected to remain” at least in the near term due to the virus.
“Full attention should be given” to further downside risks to the domestic and foreign economies stemming from the pandemic, it said.