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The preliminary report on real gross domestic product for the January-March quarter indicated an annualized 5.1% decline from the previous quarter. Japan’s GDP contracted for the first time in three quarters since April-June of last year.
A drop in personal consumption, which accounts for more than 50% of GDP, dealt a blow to the economy due to people refraining from going out, and eating and drinking establishments shortening their business hours under a state of emergency for the novel coronavirus pandemic.
GDP for fiscal 2020, which ended in March, also shrank a real 4.6% from the previous fiscal year, surpassing the 3.6% decline seen in fiscal 2008 when the global economy was hit by the crisis triggered by the collapse of U.S. investment bank Lehman Brothers. Fiscal 2020 saw the sharpest annual contraction since the end of Word War II.
Thorough measures to curb the spread of the coronavirus inevitably hurt the economy, but the impact must be minimized.
Personal consumption in the January-March quarter fell by 1.4% from the previous quarter. The main reason for the decline was sluggish consumption of services such as dining out. Corporate capital investment fell by 1.4% from the previous quarter due to sluggish growth in telecommunications equipment and automobiles. Not just consumption, but overall domestic demand, can be said to have collapsed.
On the other hand, exports showed robust 2.3% growth, reflecting a recovery of overseas economies. Exports of electronic parts, among others, have increased, the report said.
The impact on employment is a major cause for concern because the service industry, which has fallen into dire straits, accounts for a large number of jobs. The average unemployment rate in fiscal 2020 rose 0.6 percentage point from the previous fiscal year to 2.9%, the first rise in 11 years.
This is less severe than the rate seen after the collapse of Lehman Brothers, which topped 5%, thanks to policy measures such as the expansion of employment adjustment subsidies. However, the government declared a third state of emergency in April, and its impact has been prolonged. There is fear that companies will not be able to sustain their employment.
It is essential for the government to pay closer attention to the employment situation and continue providing thorough and well-tailored support.
To revive consumption, the government needs to speed up vaccinations against the coronavirus, an effort that has been stuck in a bottleneck.
In the United States, where more than 40% of the population has received at least one vaccine dose, real GDP grew by an annualized 6.4% in the January-March period, partly due to the effects of large-scale fiscal spending measures. In Britain as well, consumption of clothing and other goods is recovering rapidly, according to the report.
Around the world, the progress of vaccinations is directly linked to economic recovery.
The Japanese government should determine the cause of the delay in vaccinations and take effective measures. Distributing the vaccine widely to the public as soon as possible is the best medicine for the economy.
Corporate investment is also important. Many companies such as those in the automobile and electronics industries are improving their performance. They should promote investment in growth in areas such as digitization and the elimination of greenhouse gas emissions through decarbonization. It is hoped that such investments will create new jobs.
— The original Japanese article appeared in The Yomiuri Shimbun on May 19, 2021.
