Japan’s Gross Domestic Product Falls Sharply At Fastest Rate In Last Five Years

The world’s third-largest economy Japan might lurch towards a possible recession very soon due to a sales tax rise. Japan’s economy has shrunk at a rapid speed at the end of 2019. The gross domestic product of the country has fallen much steeper by 6.3 percent in October to December last year. Reports suggest that due to coronavirus outbreak this slump will remain the same until this quarter. Trade analysts fear that it will result in a major recession in the country. After the sales taxes were increased from 8 percent to 10 percent in October 2019, Japanese consumer spending fell by 2.9 percent. During that period only, Typhoon Hagibis also affected large parts of the nation. In the last quarter, the capital spending of the consumer has decreased by 3.7 percent in Japan. Amid the US-China trade dispute, the exports of Japan have also slipped by 0.1 percent.

Considering the reports, the economy minister of Japan, Yasutoshi Nishimura has said that the government is taking all the possible measures to deal with the current situation. In December 2019, Prime Minister Shinzo Abe has approved the revenue of $120 billion in spending to mitigate the impact of increased sales tax. The fall in the GDP has been witnessed for the first time in a year. It is the largest fall since 2014 when Japan’s GDP fell by 7.4 percent. Although experts had expected only a 3.8 percent fall in the economy due to the adverse impact of sales tax, typhoon disruption, and weak global demand. However, it has turned out to be even worse for the world’s third-largest economy.

The government had expected a diminutive impact of the sales tax as compared to a tax hike imposed in 2024, which had forced Japan’s economy to fall by 7 percent. However, it hit the country’s economy badly. The coronavirus outbreak has also restricted the spending revenue in the nation. The epidemic has blocked the way for thousands of Chinese tourists during Japan’s Olympic year, which is an important source of spending revenue in Japan.