Japan’s economy contracted by the most in five years according to figures released Monday as a sluggish global economy and the introduction of a sales tax hampered the world’s third-largest economy.
Japan’s GDP shrunk at an annualized pace of 6.3 per cent according to an estimate released by the Cabinet Office, much worse than a predicted 3.8 per cent by a survey of economists from the country and around the region.
Analysts say the contraction was due in large part to a sales tax introduced by the Shinzo Abe government in October which reduced consumer spending and hamstrung business investments.
Abe’s government has introduced measures to counter the negative effects of the sales tax hike including a $120 billion US stimulus package introduced in December. Abe has also said that he would allocate some of the budget to fighting the effects of the coronavirus.
Despite this, the contraction is the biggest since a 7.4 per cent decline in the second quarter of 2014 which was also prompted by the raising of the sales tax.
Thailand outlook
With regional economies reeling from the outbreak in China, Monday’s news will affect most markets around Asia including Thailand’s.
Supply chains have already been disrupted by the coronavirus and a poor outlook from Japan will affect Thai companies in the automotive and technology sectors as well as Thai steelmakers.