(Bloomberg) -- Japan’s economy contracted less than initially estimated last quarter, after revisions showed stronger capital investment, even as the coronavirus pandemic pushed the country into a recession.
The Cabinet Office’s revised report on Monday showed gross domestic product shrank an annualized 2.2% compared with the last quarter of 2019, better than an initial estimate of a 3.4% contraction. Economists had a expected a revision to minus 2.1%.
The result still means Japan’s economy has shrunk for a two straight quarters with an even sharper drop expected in the April-June period. Even before the revision was released, economists were casting doubt on its accuracy.
Japan revises its preliminary GDP data to incorporate investment figures from a business survey that’s published later. This time, a low response rate amid the pandemic may have skewed the results, the finance ministry said this month after the survey showed an unexpected gain in capital spending last quarter.
Key Insights
- Monday’s data is unlikely to change the view among policy makers that the economic outlook is severe. Most analysts see Japan’s recession deepening this quarter, with GDP shrinking more than 20%, the most in records going back to 1955.
- Prime Minister Shinzo Abe two weeks ago ended a national state of emergency slightly ahead of schedule, shifting the focus to how fast the economy can rebound. A resurgence of the virus in Tokyo suggests consumer spending could stay subdued. Meanwhile, export markets are also struggling to reopen.
- The Abe administration last month doubled its proposed stimulus measures to about $2 trillion, or 40% of GDP, to give lifelines to businesses and households. Some analysts say the packages don’t do enough to boost spending and more aid will be needed.
- With the impact of the pandemic expected to linger, Bank of Japan officials now see a need to start considering the ability of businesses to pay their debts, people familiar with the matter say. The central bank is set to meet next week.
What Bloomberg’s Economist Says
“A mildly narrower contraction that still puts Japan into recession -- before an expected even heavier hit in 2Q from the coronavirus -- won’t change the picture. The economy is on track for a deep slump this year, even as the government and central bank ramp up support.”
Yuki Masujima, economist
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- Business investment was revised up to 1.9% from an initial estimate of -0.5%.
- Consumer spending fell 0.8%, declining for a second straight quarter.
- Nominal GDP shrank 0.5% from the previous quarter. Analysts forecast -0.4%.
(Adds detail on GDP components.)
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