Japan’s Economy Sees Sharpest Contraction on Record in Q2 2020

The Japanese economy contracted at the fastest pace ever recorded during the second quarter of this year, as a result of the coronavirus

Japan's Economy Sees Sharpest Contraction on Record in Q2 2020

The Japanese economy contracted at the fastest pace ever recorded during the second quarter of this year, as a result of the coronavirus pandemic which drove down domestic consumption and hampered exports out of the country. According to data released by the government, Japan’s Q2 GDP came in at -27.8%, slightly worse than economists’ forecast for a 27.2% contraction.

With this, Japan continues to remain in recession, having fallen into it even before the pandemic struck, on account of global trade tensions. Lockdown restrictions in the country were lifted by end May, but it will take considerable time for the economy to rebound towards growth in the wake of the ongoing crisis.

The contraction in the economy was driven by a record 8.2% drop in domestic consumption as a result of the lockdown imposed by the government. Meanwhile, the reduction in external demand due to the global pandemic took down the GDP by 3% as exports fell by 18.5% during the period. On a slightly positive note, the decline in capital expenditure was smaller than expected, falling by 1.5% during Q2 vs. economists’ forecast for a 4.2% decline instead.

Addressing a news conference, Economy Minister Yasutoshi Nishimura stated that the contraction in the GDP was “pretty severe”, but there were signs of improvement in domestic consumption. He added, “We hope to do our utmost to push Japan’s economy, which likely bottomed out in April and May, back to a recovery path driven by domestic demand.”

ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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