The Financial Express

Japan's economy shrinks 4.6pc in FY 2020

| Updated: May 25, 2021 14:18:53

File photo used for representational purpose File photo used for representational purpose

Japan's gross domestic product (GDP) in the fiscal year 2020 shrank 4.6 per cent in real terms, down for the second straight year, government statistics revealed Tuesday.

The figure logged the largest annual contraction on record since data began to be compiled in fiscal 1955, according to the preliminary data released by the Cabinet Office.

The previous record decrease was a 3.6-per cent shrinkage in fiscal 2008 marked in the wake of the global financial crisis, reports Xinhua.

Meanwhile, government statistics showed the country's economy in the January-March period contracted an annualized real 5.1 per cent compared to the previous quarter, the first shrinkage in three quarters, due to a second state of emergency over the COVID-19 pandemic.

The decrease in real GDP, the total value of goods and services produced in the country adjusted for inflation, corresponds to a 1.3-per cent contraction on a seasonally adjusted quarterly basis, government data showed.

The latest quarterly GDP contraction was worse than private-sector economists' average projection of an annualized 4.61 per cent shrinkage.

Amid a resurgence of COVID-19 infections since November, the government declared the second state of emergency in early January for the Tokyo metropolitan area. It was expanded it to 11 out of Japan's 47 prefectures within a week before it was fully lifted in late March.

The emergency state requiring people to stay at home and restaurants and bars to shorten opening hours led to a sharp drop of 1.4 per cent in private consumption.

After marking the record high GDP drop in 2020's second quarter due to the first state of emergency over COVID-19 from April to May, the Japanese economy rebounded strongly until the October-December quarter with the gradual resumption of economic activities contributing to consumption and exports.

Looking ahead, some analysts predicted that Japan's economy will continue to contract in the current April-June period, as a third state of emergency declared late last month was extended and expanded to cover Tokyo and eight prefectures amid the spread of more contagious COVID variants, while the country is lagging behind in its vaccine rollout.

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