The world’s third-largest economy appears to be heading towards its “worst recession” since the 2008 global financial crisis as the COVID-19 pandemic disrupts local and international markets.
Japan’s Cabinet Office warned in its report this month that the country’s economy is “in a severe situation, extremely depressed by the novel coronavirus”.
Barclays economists Tetsufumi Yamakawa and Kazuma Maeda observed in the report that Japan’s economic deterioration is linked to “the triple whammy of fiscal contraction” stemming from “the consumption tax hike, the COVID-19 outbreak and the postponement of the Tokyo Olympics”.
Prime Minister Shinzo Abe’s three-pronged economic strategy—known as “Abenomics”—comprising monetary easing, fiscal spending and structural reforms following his re-election is not spared from the severe repercussions of the COVID-19 pandemic.
On top of existing policy packages worth more than one trillion, Mr Abe is looking to introduce a 26 trillion yen stimulus in Dec to overcome the shocks of the 1 Oct tax hike.
Yasutoshi Nishimura, minister in charge of economic and fiscal policy, told a press conference after the Cabinet approved the Mar report: “We are aware that the moderate recovery trend has clearly turned around and (the economy) has entered a downward phase.”
Just last month, the Japanese government observed a “moderate” recovery of the domestic economy, with the manufacturing sector becoming increasingly weak “as exports remain in a weak tone”.
Toshihiro Nagahama, chief economist at the Dai-ichi Life Research Institute, told The Japan Times that in addition to the prospect of Japan plunging into the worst recession since the global financial crisis 12 years ago, cancelling the 2020 Tokyo Olympics would cause “unmeasurable” damage to the economy.
“This could also deteriorate public sentiment significantly,” Nagahama added.
Tokyo accounts for around 19 per cent of the nation’s economy—a slowdown in the capital city alone affects the East Asian nation’s entire economy, diminishing national input by 5 per cent.
Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities Inc., also told The Japan Times that the government’s decision to restrict public events to prevent further transmission of COVID-19 “is causing great damage” to the economy.
The massive coronavirus outbreak has severely impacted Singapore’s economy—another free-market economy—as well.
Deputy Prime Minister Heng Swee Keat on Thu (27 Mar) introduced in Parliament a S$48 billion supplementary Budget—called the Resilience Budget—which will serve as an enhancement to some of the measures introduced in the S$6.4 billion Unity Budget announced last month.
Mr Heng, who is also Finance Minister, said that the new stimulus package, at its core, focuses on the need to “save jobs, support workers and protect” the livelihood of Singaporeans in the midst of a weakened economy as a result of the COVID-19 pandemic.
Mr Heng said that nearly S$55 billion will be dedicated to combating the novel coronavirus outbreak in Singapore.