Economic statistics show that the coronavirus shock has put a brake on the growth of the Japanese economy.
The preliminary report on real gross domestic product (GDP) for the January-March period marked an annualized 3.4% decline from the previous quarter.
Although the rate of decline shrank compared to that in the previous quarter, which was affected by the consumption tax rate hike, GDP contracted for the second consecutive quarter for the first time in about four years.
Economic activities have been sluggish since late February, when calls urging people to avoid going out or holding events began to spread. Since the government declared a state of emergency in April, the economic situation has worsened further. It is important that both the public and private sectors take every possible measure to prevent the economy from falling into a serious business slump.
According to GDP data for the January-March quarter, both domestic and external demand appeared to have completely collapsed.
In addition to consumer spending and capital investment — two pillars of domestic demand — housing investment also recorded negative growth for the second consecutive quarter.
The spread of the new coronavirus may have dampened consumer and business sentiment.
As for external demand, exports declined sharply at an annualized rate of more than 20%. Demand for semiconductor manufacturing equipment and automobiles decreased in China, the epicenter of the outbreak, and elsewhere. The sharp drop in spending by foreign visitors in Japan, which is statistically counted as exports, also contributed to the decline.
With restrictions imposed on travel to Japan from overseas, as well as calls for people to avoid going out and businesses to limit operations, a temporary decline in GDP was unavoidable to some extent.
However, it is vital to prepare for a long battle in the fight against infections. Continuous efforts must be made to bring the economy closer to normal on the premise of coexistence with the coronavirus.
The most important point is the trend in personal consumption, which accounts for more than 50% of GDP. If the reluctance to buy products is prolonged due to uncertainty over the future, there is a fear that the economy could return to deflation. Further deterioration of consumer sentiment must be avoided by protecting employment and wages.
Each industry group has presented guidelines for the resumption of operations.
People are being urged not to dine out in large groups and chairs are being arranged so that diners are sat side by side. Retailers are asking customers to stand at a safe distance from others when lining up at cash registers and encouraging the use of cashless payment services. Consumers also are asked to get used to a “new normal.”
Some areas of consumption are growing amid the spread of infections, such as online shopping and food delivery services. It is hoped that the crisis will provide an opportunity to stimulate new demand.
Establishing a reliable medical system is essential for sustainable economic activities. Although the number of new coronavirus cases is on the decline, it is necessary to remain vigilant against the second and third waves of infection, and promote the expansion of polymerase chain reaction testing and the provision of a sufficient number of hospital beds.
— The original Japanese article appeared in The Yomiuri Shimbun on May 19, 2020.