Japan reports its worst GDP on record

The world’s third-largest economy shrank 7.8% in the second quarter compared to the previous quarter, the country’s cabinet said on Monday. That translates to an annual decline rate of 27.8%, the lowest since modern records began in 1980 and the third consecutive quarter of contraction.

But Japan performed better than other major economies in the period April-June, when the United States and Germany both recorded 10% falls in the previous quarter and British output crashed 20.4%.

Among the remaining G7 economies, Canada’s statistics agency said it expects second-quarter GDP to contract 12% from the previous quarter.

However, China returned to growth in the second quarter, meaning the world’s second largest economy escaped a recession after its worst start of the year in decades.

Like many other economies, Japan’s GDP contraction was largely due to shrinking consumer spending due to the restrictions imposed to contain Covid-19, as well as falling exports.

Consumption, which accounts for more than half of Japan’s economy, fell 8.2% for the quarter when companies nationwide shot up at a national week of six weeks in April and May.

External demand shot down three percentage points of GDP in the quarter when exports were hammered by the downturn in global trade.

“While not as large as the drop seen in other advanced economies, the Q2 fall marks growth despite the third consecutive quarter that growth has increased, underscoring Japan’s vulnerability to more shock shocks, “Oxford Economics wrote in a note.

There is also concern about the pace of recovery, despite a rebound in activity in June and July.

Many economists warn that a number of relief measures adopted in two economic stimulus packages earlier this year will expire in September, posing a risk to small and medium-sized enterprises covering most of Japan’s economy.

“The lack of coherent policy response is really dire. We need a sensible, cautious and broad response to this dire situation. It’s just something [Prime Minister] Abe and company are missing out when it comes to the way they go about things, “said Noriko Hama, a professor at Doshisha Business School, part of Doshisha University.

The Japanese government jointly unveiled a subsidized plan to increase domestic travel in mid-July, just as new virus cases began to grow.

Japan alone reported more than 19,000 new virus cases in August, which is about a third of the total number of infections it has registered during the entire pandemic.

– CNN’s Laura He, Yoko Wakatsuki, and Sol Han have contributed to this article.