Japan’s economic condition has taken a downfall this year and the latest coronavirus outbreak has further made conditions worse.
It started with a sales tax hike that shrunk the Japanese economy by 6.3% in the last quarter. The increase in sales tax from 8% to 10% led to a decline in domestic consumption due to increased costs. This would lead to a fall in profits. The business investment in Japan has also declined. This was the lowest GDP recorded in Japan since 2014 when it had, again, hiked up its sales tax.
It was anticipated that the economy would recover from the after-effects of the hike as well as the Typhoon Hagibis, in the next quarter but the outbreak of the coronavirus in China has made it impossible for Japan to get back on its feet, it seems.
Due to Japan’s aged population majority, increasing the sales tax was an important decision so as to cover up other social welfare costs. It was a necessary evil that the Prime Minister, Shinzo Abe reluctantly went for. The result of this was a pre-tax shopping spree all over the country, with people rushing to buy things before the tax rate was implemented. The faith of the consumers was shaken as well. The necessary steps to recover from this have been implemented, such as discount vouchers, shopping vouchers, etc in order to increase consumption.
Furthermore, even the trade between Japan and China was strained due to its sales tax hike. This was mainly due to the fact that China is Japan’s largest trading partner.
But despite all these efforts, the coronavirus outbreak further slumped the tourist economy for Japan as China is its biggest source of tourism in the country.
This is particularly why Japan is taking the maximum hit from the coronavirus outbreak than the rest of the world. Its internal economic crisis also plays a major role in it. While, the rest of the global economies are sure to record less growth this year, Japan is yet to recover from its internal economic slump. Therefore, the Japanese economy is still set to go downhill, but not solely due to China’s coronavirus outbreak.
Reports released by Japanese officials reveal that Japan has hit the iceberg already. Meanwhile, the world awaits to witness the recovery process.