TOKYO -- Japan's economy shrank 7.8% in April-June from the preceding quarter, or at an annualized pace of 27.8%, the Cabinet Office said Monday, as private consumption and exports bore the brunt of the coronavirus pandemic.
The third consecutive decline on the quarter was also Japan's biggest under gross domestic product data going back to 1955, exceeding the country's 4.8% drop in January-March 2009 in the wake of the Lehman crisis.
Economists expected a decline of 7.3%, or an annualized fall of 26.3%. A big drop was anticipated following a state of emergency in April and May that kept many retail outlets closed, while exports were slammed by shutdowns in the U.S. and Europe.
The April-June plunge wiped out much of the growth achieved under Abenomics, the signature economic program of Prime Minister Shinzo Abe, in the past eight years under his leadership.
The sharp contraction was "unavoidable" given the unprecedented circumstances created by the coronavirus, said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute. What's important is to get the economy back on a recovery path, he added.
"The top priority for the Abe government should be to bring the coronavirus outbreak under control so that normal economic activity can be resumed," Kodama said. Helping rebuild industries hit hardest by the pandemic, such as restaurants and tourism, is an urgent task, so is accelerating the digitization of the economy, an area where the pandemic has shown Japan is falling short, Kodama said.
A long-term fiscal sustainability plan also needs to be formulated after a sharp increase in government deficits, Kodama added.
Though Japan's decline was less severe than in the U.S. and the U.K., where the economy shrank 9.5% and 20.4%, respectively, it was deeper than in Asian peers such as South Korea and China.
South Korea's economy shrank 3.3% in the second quarter. The country, a top producer of memory chips, benefited from a surge in demand for personal computers as more people opted to work from home to avoid the risk of infection.
China's economy rebounded with 3.2% growth on the year in April-June after a decline of 6.8% in January-March. Beijing's draconian handling of coronavirus cases helped contain the outbreak faster, and reopen the economy earlier, than in other countries, economists said.
In Japan, an increase in people working from home spurred growth in imports of PCs from China. An emergency government program to hand out 100,000 yen ($940) to every Japanese resident helped resuscitate private consumption as the economy gradually reopened in May and June, economists said.