The Strategist

Japan's GDP in the IV quarter falls at the fastest rate since 2014

02/17/2020 - 09:38

In the fourth quarter of 2019, Japan's GDP fell by 6.3% year on year. This is the maximum rate of economic decline over 5.5 years, following increase in the consumption tax in the country.

Japan's GDP in the IV quarter falls at the fastest rate since 2014
A drop in GDP was recorded for the first time since the third quarter of 2018. Analysts interviewed by Trading Economics expected an average decline of the Japanese economy in the fourth quarter by 3.7%. In the III quarter, according to revised data, Japan's GDP grew by 0.5%, and not by 1.8%, as previously reported.

Analysts warn that the country's economy may contract in January-March 2020 against the backdrop of the spread of coronavirus. A fall in GDP over two consecutive quarters will mean a technical recession.

Compared with the third quarter, Japan's GDP in October-December fell by 1.6% against the forecast of a decrease of 0.9%. The estimate of Japan's GDP growth in quarterly terms in July-September was revised to 0.1% from 0.4%.

Consumer spending in Japan in October-December fell by 2.9% compared with the previous quarter. The fall, which was noted for the first time in five quarters, was the result of an increase in the consumption tax (similar to VAT) in the country from October 1, 2019 to 10% from 8%. In addition, economists note that warmer than usual winter weather in Japan this year contributed to lower consumer spending.

Japanese business investment fell for the first time in three quarters - by 3.7% - against the backdrop of the US-China trade war, which increased uncertainty of the prospects for the global economy.

The volume of Japanese in the past quarter decreased by 0.1%, imports decreased by 2.6%.

Analysts expect the negative effects of higher consumption tax in Japan to weaken in the first quarter of 2020, but the spread of Chinese coronavirus will limit the economic recovery.