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Japan's household spending plunged in March and service-sector activity shrank at a record pace in April, reinforcing expectations that the coronavirus pandemic is tipping the world's third-largest economy into deep recession.
Household spending slumped 6.0 percent in March from a year earlier following a 0.3-percent-fall in February, marking the biggest drop in five years, government data showed on Friday.
The decline, a tad smaller than a median market forecast for a 6.7-percent-fall, was due largely to plunging demand for travel, clothing and eating out as the government asked citizens to refrain from going out and some businesses to shut down.
There were some winners with firms that provide catering for people at home seeing increased business.
Spending on pasta jumped 44 percent as people cooked at home more often, while purchases of gaming consoles more than doubled as school closures kept children housebound. However, those increases were not enough to make up for the plunging demand for other items.
Overtime pay – a barometer of strength in corporate activity – also plunged at a record pace in March, data showed, a sign companies were hit by shrinking business even before the government announced a state of emergency in early April.
The weak readings make it a near certainty the economy suffered a second straight quarter of contraction in January-March, the technical definition of a recession, and was on track for a deeper decline in the current quarter as the health crisis kept shoppers home and businesses closed.
"Even without the virus, Japan’s economy was very weak due to the hit from last year’s sales tax hike. The pandemic has completely destroyed any chance of a recovery," said Taro Saito, executive research fellow at NLI Research Institute.
"The economy may rebound somewhat in July-September but won't return to pre-coronavirus levels for the rest of this year," said Saito, who expects the economy to contract an annualized 30 percent in the current quarter.
(REUTERS)
