The world’s third-largest economy shrank 0.9% in the January-to-March period compared to the prior quarter, according to government data released Monday. While that is slightly better than the 1.2% drop forecast in a Refinitiv poll of analysts, it is still the second straight quarter of declines — meaning Japan has now entered recession.
The drop was more dramatic, a 3.4% fall, when measured as an annualized rate.
And though the virus started weighing on the country in early 2020, analysts warn that Japan’s first quarter does not capture the full effect of the pandemic.
“The sharp fall in output in the first quarter suggests the spread of the virus had already dealt a significant blow to economic activity in March,” wrote Tom Learmouth, Japan economist for Capital Economics, in a research note Monday. He said that “much worse” is to come in the second quarter, forecasting a 12% quarter-on-quarter plunge.
Private consumption, which contributes to more than half of Japan’s economy, fell 0.7% — and that was before the government declared a state of emergency that led to nationwide restaurant and retail closures.
“That’s just the tip of the iceberg,” Learmouth said. “April and May will have been far worse.”