Hit by the impact of the spread of novel coronavirus infections, Japan's gross domestic product during the April-June quarter registered a postwar record for negative growth, with the value of real GDP at an annual rate falling short of the 500 trillion yen threshold for the first time in 7-1/2 years.
As the restraint of economic activities is seen to continue for some time to come, a pessimistic view is growing that the country's GDP will only recover to levels before the coronavirus pandemic in 2022 or even later.
--As low as 2011 quake
The real GDP on an annualized basis was 485 trillion yen, plunging to a level as low as one posted during the April-June quarter in 2011, the period immediately after the nation was hit by the Great East Japan Earthquake. The latest real GDP figure even showed as much as a 10% decline from the 539 trillion yen logged during the July-September quarter in 2019, the period prior to the hike in the consumption tax rate, when there was no spread of coronavirus infections in sight.
According to estimates by private research firms, the domestic economy hit bottom in May and is expected to shift into positive growth sharply during the July-September quarter, rebounding from the April-June plunge. A prevailing view has it that after the current quarter, the recovery will slow down during the October-December quarter and thereafter, with the real GDP expected to return to levels before the coronavirus pandemic only between fiscal 2022 and 2024.
SMBC Nikko Securities Inc. estimates that the nation's GDP will recover to pre-coronavirus levels in 2023. The firm also assumes the GDP will make a quick recovery to grow at an annualized 15.3% in the July-September quarter, but will slow to an annualized 9.7% in the October-December quarter, due to uncertainty over when the coronavirus resurgence will be brought under control.
--Put off to FY2024?
The Dai-ichi Life Research Institute Inc. has a more pessimistic view, saying that the timing for the nation's economic activities to return to pre-virus levels is "likely to be put off to around fiscal 2024."
"It is highly likely that the phase of a sharp rebound in the early period of recovery has ended," the institute said, with an estimate that the deterioration in business performance and the decline in employment and wages would become more serious due to uncertainty over future prospects.
On the other hand, Mitsubishi UFJ Research and Consulting Co. assumes that Japan's GDP will recover to the pre-coronavirus level in fiscal 2022, relatively earlier than others.
"Due to the effect of the Tokyo Olympic Games [scheduled to be held next year] and the recovery of the world economy, the economic pick-up will continue," MURC said.
At the time of the bankruptcy of U.S. investment bank Lehman Brothers in September 2008, it took about four years for Japan's economy to recover to levels prior to the bank's collapse after hitting bottom. The real GDP for the January-March quarter in 2009 was down 17.8% at an annual rate, with the real GDP falling to as low as 463 trillion yen. The real GDP recovered to nearly 500 trillion yen in the July-September quarter in 2010, but in March the following year, the Great East Japan Earthquake hit the nation. It was during the April-June quarter in 2013 when the real GDP recovered to the level of 506 trillion yen posted during the January-March quarter in 2008.
After the Lehman Brothers collapse, major countries strove for economic recovery through large-scale monetary easing and massive government spending.
To deal with the pandemic, measures for economic recovery also face a difficult aspect. Even if the government tries to create demand through fiscal stimulus measures, the effects would be limited because it has to think about infection prevention.
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