Japan, which has bucked the global trend by not imposing the kind of stringent measures used by other nations to confront the coronavirus, is still suffering from a record-breaking economic collapse.
Japan’s economy will suffer a 25 percent contraction in the current quarter, even with the just announced government fiscal aid package, as the coronavirus slams consumer spending and business growth, Goldman Sachs said Wednesday.
The dismal report by economists Naohiko Baba and Yuriko Tanaka said exports are expected to dive by 60 percent in the April-June period.
The contraction for the world’s third largest economy would be a record, since GDP, or gross domestic product, began to be tracked in 1955, according to the report.
Japan’s prime minister, Shinzo Abe, declared a state of emergency this week in the face of rising coronavirus infections. But the declaration covers only seven of Japan’s prefectures and largely depends on voluntary compliance. Public transportation continues to run and prefecture governors are only permitted to request that people work from home and avoid going out. Grocery stores and banks remain open. Even schools cannot be required to close.
Japan’s history of repression under fascist governments before and during World War II has left the public wary of government overreach. The country’s postwar constitution lays out strict protections for civil liberties, leaving the government without authority to order stricter measures.
The report says the declaration “will meaningfully change the behavior of individuals, business owners and event organizers.”
The government announced a 108 trillion yen ($1 trillion) rescue package, but the report estimates the perk to GDP will total only 14 trillion yen ($130 billion), from the cash handouts to needy families and monetary help to small businesses.
The report doesn’t take a view on the outbreak’s future. But it says Japan’s economic activity will likely recover with the third quarter as overseas economies pick up and will “gradually normalize” next year, picking up with the postponed Olympics held in the summer. Japan’s GDP is expected to grow 3.1 percent in 2021, it said.
–The Associated Press contributed to this report.