THE ASAHI SHIMBUN
July 31, 2020 at 16:35 JST
Prime Minister Shinzo Abe attends the Council on Economic and Fiscal Policy meeting at the prime minister’s office on July 30. (Takeshi Iwashita)
Real gross domestic product will shrink by 4.5 percent in fiscal 2020 as the novel coronavirus pandemic has hit the economy harder than the Lehman shock of 2008, according to a government forecast.
The annual contraction predicted by the Council on Economic and Fiscal Policy on July 30 will be the first since fiscal 2014, when the consumption tax rate was raised to 8 percent.
The government in January had predicted real GDP to increase by 1.4 percent. But the novel coronavirus then struck various countries outside of China, including Japan, leading to a pandemic.
The new prediction is even worse than the shrinkage of 3.4 percent in fiscal 2008 after the collapse of U.S. investment bank Lehman Brothers sparked a global financial crisis.
The government releases its economic forecasts around January and July every year. It will compile the budget for fiscal 2021 based on the latest prediction.
Some economists said the government’s forecast is overly optimistic.
After Japan declared a state of emergency over the COVID-19 crisis in April, the public was asked to stay home and many businesses shut down their operations.
The government revised downward its forecasts for economic indicators across the board, including consumer spending, investment in plant and equipment, and exports.
However, the latest prediction is based on the assumption that the economy will recover with the help of COVID-19 measures, such as handouts of 100,000 yen ($958.40) for every resident and growth in digital investments.
The government did provide another prediction of a 5-percent shrinkage of the economy in fiscal 2020 if a new wave of novel coronavirus infections spreads overseas in and after autumn.
That estimate was closer to the average contraction of 5.4 percent found in a survey of private sector economists by the Japan Center for Economic Research.
New coronavirus cases have already resurged in Japan and other countries.
The government also predicted the economy would expand by 3.4 percent in fiscal 2021. But that expectation could come to naught if the COVID-19 pandemic is further prolonged.
(This article was written by Naoki Tsuzaka and Tomohiro Yamamoto.)
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