TOKYO (Reuters) – Japan’s economy likely contracted at the sharpest pace on record in the second quarter as the coronavirus crisis crushed business and consumer spending, a Reuters’ poll showed, and a recent surge in infections is clouding the outlook for recovery.
Such a grim reading would cement views that the world’s third-largest economy has fallen into a deeper recession, and reinforce expectations that the government will need to compile another stimulus package on top of $2.2 trillion announced so far.
Gross domestic product (GDP) is expected to have shrunk by an annualised 27.2% in April-June, the third straight quarterly contraction and the biggest decline on record since comparable data became available in 1980, the poll of 18 economists found.
On a quarter-on-quarter basis, GDP likely fell 7.6%, the poll showed on Friday.
“Both domestic and foreign demand sharply declined due to the expansion of the coronavirus infection,” said Shinichiro Kobayashi, senior economist at Mitsubishi UFJ Research and Consulting.
“The data will likely reconfirm the depth of economic impact from the coronavirus outbreak.”
Private consumption, which accounts for more than half of Japan’s economy, was projected to have dropped 7.1% for the quarter, the poll showed, also a third straight quarterly fall.
Capital spending was expected to have declined 4.1% in the second quarter, the poll found, the first fall in two quarters.
External demand – or exports minus imports – likely subtracted 3.2 percentage point from GDP, as the pandemic dampened global demand.
The Cabinet Office will announce GDP at 8:50 a.m. on August 17 Monday Japan time (2350 GMT, Sunday).
The Bank of Japan’s corporate goods price index (CGPI), which measures the prices companies charge each other for goods and services, likely slipped 1.1% in July from a year earlier, slowing down from a 1.6% decline in June, the poll found.
The central bank will publish CGPI on August 13.
Japan’s economic activity has gradually resumed in recent months after the government lifted a coronavirus-related state of emergency at the end of May. But the virus has made a worrying resurgence, particularly in Tokyo.
(Reporting by Kaori Kaneko; Editing by Kim Coghill)