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Economy

Japan's GDP forecast to shrink 11% in second quarter

Private economists downgrade outlook again after state of emergency declared

Economists had projected GDP to grow 2.31% for the April-June quarter in the same survey a month ago.   © Reuters

TOKYO -- The Japanese economy will contract more than 11% in the April-June quarter as the coronavirus crisis intensifies, according to the latest consensus forecast of private-sector economists.

The outlook for the world's third-largest economy worsens by the week. Economists had predicted real gross domestic product to grow an annualized 2.31% for the second quarter in a March 3-10 survey by the Japan Center for Economic Research. They cut the forecast to minus 6.93% in a poll taken between March 27 and April 3.

Now, with the pandemic raging and Japan declaring a state of emergency, the second-quarter outlook reached minus 11.08% in a special poll that closed Wednesday. Asked about the first quarter, the 24 respondents estimated that GDP likely contracted 4.06%.

The latest forecasts would mark a third straight instance of negative quarter-to-quarter growth that began in the fourth quarter of 2019 after the consumption tax was raised last October.

Respondents now see GDP shrinking 3.09% for the fiscal year through March 2021, compared with the 0.16% contraction forecast in early March. They estimate a 0.1% dip for the year ended March 31.

"Even in a scenario with the coronavirus's spread subsiding come June in Japan, the U.S. and Europe, the Japanese economy will continue to face an extremely serious situation for both domestic and foreign demand," said Keiji Kanda, senior economist at the Daiwa Institute of Research. Taking into account "the impact of the declaration of a state of emergency," he predicted that real GDP will shrink by about 24.4 trillion yen ($225 billion) this year.

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