The world’s third-largest economy shrank 0.9% in the January-to-March period compared with the previous quarter, according to government data released Monday. While it was slightly better than the 1.2% decline forecast in the Refinitiv analyst poll, it was still the second quarter of a row in a row – meaning Japan has now entered a recession.
The decline was more dramatic, a 3.4% decrease, when measured as an annual rate.
And although the virus began to overload the country in early 2020, analysts warned that Japan’s first quarter did not capture the full effects of the pandemic.
“The sharp decline in output in the first quarter showed the spread of the virus had dealt a significant blow to economic activity in March,” wrote Tom Learmouth, Japanese economist for Capital Economics, in a research note Monday. He said that “far worse” would come in the second quarter, estimating a 12% quarter-to-quarter decline.
Private consumption, which accounts for more than half of Japan’s economy, fell 0.7% – and that was before the government declared a state of emergency that led to national restaurants and retail closures.
“That’s just the tip of the iceberg,” Learmouth said. “April and May will be much worse.”