Japan’s record economic plunge guts Abe era gains

Japan was hit by its biggest economic slump on record in the second quarter as the pandemic emptied shopping malls and crushed demand for cars and other exports, bolstering the case for bolder policy action to prevent a deeper recession.

The third straight quarter of declines knocked the size of real gross domestic product (GDP) to decade-low levels, wiping out the benefits brought by Prime Minister Shinzo Abe’s ‘Abenomics’ stimulus policies deployed in late 2012.

While the economy is emerging from the doldrums after lockdowns were lifted in late May, many analysts expect any rebound to be modest as a renewed rise in infections keeps consumers’ purse-strings tight.

“The big decline can be explained by the decrease in consumption and exports,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“I expect growth to turn positive in the July-September quarter. But globally, the rebound is sluggish everywhere except for China.”

The world’s third-largest economy shrank an annualised 27.8% in April-June, government data showed on Monday, marking the biggest decline in GDP since comparable data became available in 1980.

Underlying the dismal reading was private consumption, which plunged a record 8.2% as lockdowns kept consumers at home.