Japan suffered its biggest economic contraction on record in the second quarter as the coronavirus pandemic hit consumption and exports, mounting pressure on policymakers to take bolder action to prevent a deeper recession.
The third straight quarter of declines knocked the size of real gross domestic product to decade-low levels, wiping out the benefits brought by Prime Minister Shinzo Abe's "Abenomics" stimulus policies that were introduced in late 2012.
While the economy is emerging from the doldrums after movement restrictions were lifted in late May, many analysts expect any rebound in the current quarter to be modest as a renewed rise in infections keeps consumers' purse strings tight.
"The big decline can be explained by the decrease in consumption and exports," said Takeshi Minami, chief economist at Norinchukin Research Institute.
"I expect growth to turn positive in the July-September quarter. But globally, the rebound is sluggish everywhere except for China."
The world's third-largest economy shrank by an annualised 27.8 per cent in April to June, government data showed on Monday, marking the biggest decline since comparable data became available in 1980 and slightly bigger than a median market forecast for a 27.2 per cent drop.
While the contraction was smaller than a 32.9 per cent decrease in the US, it was much bigger than a 17.8 per cent fall Japan suffered in the first quarter of 2009, a few months after the collapse of Lehman Brothers jolted global financial markets.
The size of Japan's real GDP shrank to 485 trillion yen (Dh16.7tn), the lowest since the April to June period in 2011, when Japan was still suffering from two decades of deflation and economic stagnation.
Japanese shares fell on Monday by the most in two weeks and yields on most government bonds fell on the weak GDP data.
Elsewhere in the region, Thailand reported its biggest economic decline since the Asian financial crisis of 1998.
Underlying Japan's dismal reading was private consumption, which fell by a record 8.2 per cent as movement restrictions to prevent the spread of the virus kept consumers at home.
External demand – or exports minus imports – shaved a record 3 percentage points off GDP, as overseas shipments declined by 18.5 per cent, with car exports hit particularly hard.
Falling global vehicle sales have hurt car makers such as Mazda and Nissan, among the biggest drivers of Japan's economy, and their parts' suppliers.
Capital expenditure declined by 1.5 per cent in the second quarter, less than a median market forecast for a 4.2 per cent fall, as solid software investment made up for weak spending in other sectors.
Economy Minister Yasutoshi Nishimura conceded that the GDP readings were "pretty severe", but pointed to some bright spots such as a recent pickup in consumption.
"We hope to do our utmost to push Japan's economy, which likely bottomed out in April and May, back to a recovery path driven by domestic demand," he said.
However, some analysts issued a warning that companies could cut jobs and spending if a resurgence in infections and soft global demand continue to hurt their profits.
Renewed US-China tension may also weigh on the fragile recovery. About 90 per cent of economists surveyed by Reuters expect the conflict to affect Japan's economy.
"Demand for business investment is expected to fall due to worsening corporate profits and risk of the coronavirus spreading," said Saisuke Sakai, senior economist at Mizuho Research institute.
"There is a chance economic activity may stagnate if major nations adopt lockdown measures again, or Japan reissues a state of emergency," he said.
Japan has unveiled fiscal and monetary stimulus packages to cushion the blow from the pandemic, which hit an economy already reeling from last year's sales tax increase and the US-China trade war.
While the economy has reopened after the government lifted state of emergency measures in late May, a worrying resurgence in infections clouds the outlook for business and household spending.
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
Infiniti QX80 specs
Engine: twin-turbocharged 3.5-liter V6
Power: 450hp
Torque: 700Nm
Price: From Dh450,000, Autograph model from Dh510,000
Available: Now
The team
Photographer: Mateusz Stefanowski at Art Factory
Videographer: Jear Valasquez
Fashion director: Sarah Maisey
Make-up: Gulum Erzincan at Art Factory
Model: Randa at Art Factory Videographer’s assistant: Zanong Magat
Photographer’s assistant: Sophia Shlykova
With thanks to Jubail Mangrove Park, Jubail Island, Abu Dhabi
UAE currency: the story behind the money in your pockets
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
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RESULT
Manchester City 1 Sheffield United 0
Man City: Jesus (9')
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
UAE jiu-jitsu squad
Men: Hamad Nawad and Khalid Al Balushi (56kg), Omar Al Fadhli and Saeed Al Mazroui (62kg), Taleb Al Kirbi and Humaid Al Kaabi (69kg), Mohammed Al Qubaisi and Saud Al Hammadi (70kg), Khalfan Belhol and Mohammad Haitham Radhi (85kg), Faisal Al Ketbi and Zayed Al Kaabi (94kg)
Women: Wadima Al Yafei and Mahra Al Hanaei (49kg), Bashayer Al Matrooshi and Hessa Al Shamsi (62kg)
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
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The years Ramadan fell in May
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
SPECS
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The specs
Engine: 6.2-litre V8
Transmission: seven-speed auto
Power: 420 bhp
Torque: 624Nm
Price: from Dh293,200
On sale: now
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
Pharaoh's curse
British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.
Read more about the coronavirus
The specs
Engine: 2.0-litre 4-cylinder turbo
Power: 240hp at 5,500rpm
Torque: 390Nm at 3,000rpm
Transmission: eight-speed auto
Price: from Dh122,745
On sale: now
UK-EU trade at a glance
EU fishing vessels guaranteed access to UK waters for 12 years
Co-operation on security initiatives and procurement of defence products
Youth experience scheme to work, study or volunteer in UK and EU countries
Smoother border management with use of e-gates
Cutting red tape on import and export of food
Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
