10 Jul 2020
The Japanese economy will contract at the fastest rate in decades in the year through March 2021, according to the results of a Reuters poll on Friday.
Many survey respondents forecast the Bank of Japan would soon move to expand stimulus, but do not believe the coronavirus pandemic would fuel a crisis in the banking sector this year.
Japan’s economy – the third largest in the world – is expected to shrink 5.3% this fiscal year, according to the poll of over 30 economists, carried out between July 3-9.
This would be the largest contraction since comparable data started to become available in 1994.
The findings also showed Japan’s economy would rebound 3.3% next year.
In addition, the poll revealed the economy will grow at an annualised 10.0% pace in Q3 following a 23.9% contraction in Q2.
Atsushi Takeda, chief economist at Itochu Research Institute said: “It would take two to three years for economic activity to return to normal levels in Japan as its overseas markets are likely to continue suffering from the spread of the virus.”
Two third of economists who took part in this poll forecast Japan to announce its next stimulus package this year, following a previous two packages totalling $2.2 trillion.
Arata Oto, market economist at Societe Generale Securities Japan, forecasts the next round of stimulus to be worth around 1-2% of Japan’s GDP.
Oto said the stimulus package “would aim at accelerating Japan’s recovery ... once there are more signs the pandemic is beginning to subside, or to help further cushion the blow from COVID-19 if the likelihood of a second wave heightens.”
At the rate review next week, the Bank of Japan is expected to maintain its outlook that the economy will recover gradually this year from the coronavirus-fuelled downturn, according to sources.
The country’s core consumer prices, which do not take into account fresh food prices but include energy costs, will fall 0.4% this current fiscal year, and increase 0.3% the next fiscal year, the latest poll revealed.
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