Japan’s Economy Declined During the Fourth Quarter of 2019
Japan’s Gross Domestic Product (GDP) declined during the fourth quarter of 2019 by an annualized rate of 6.3% which was more than the market’s expectation of a 3.8% fall in GDP. The main factor contributing to the decline in GDP was the increase in sales tax which negatively impacted business and consumer spending. The decline in Japan’s fourth quarter GDP outturn was the largest drop in GDP since the second quarter of 2014, when the government increased sales tax during that period. During the fourth quarter of 2019, the Government of Japan deployed a raft of counter measures aimed at smoothing out fluctuations in demand, but the measures appear ineffective so far.
Given that China is one of Japan’s main trading partners, it is likely that Japan’s GDP for the first quarter of 2020 will be negatively impacted by China’s weakening consumer de-mand. The expected weakening in consumer demand in China caused by the coronavirus outbreak is expected to impact Japan’s exports and has the potential to disrupt Japan’s production.