As capital expenditure gets affected by this year’s financial crunch, Japan sees its economy diminishing worse than expected in the first quarter. Policymakers are bearing the worst impact of the COVID-19 pandemic after seeing a profound recession this year.
The other highlighted aspects facing obstacles are wages and household spendings that have constantly been falling from July onwards. The adverse impact continued even after lockdown restrictions were lifted in May.
New Challenges For The New Prime Minister
The data and figures from the last quarter reflect the upcoming times to be challenging for the new Prime Minister to be elected on September 14. The new PM in ruling would need to tackle the COVID-19 pandemic’s adversity while eliminating the need to put business operations under any restrictions.
Japan has the world’s third-largest economy in the world, which has already narrowed to 28.1% from April to June. As per the amended GDP (gross domestic product) data displayed on Tuesday, this has gone beyond a preliminary reading of 27.8% downtick.
This record hardly seems parallel to the economy’s forecast by the median market stating a surprising decline of 28.6% in a Reuters Poll. Economists blame the 4.7% of tail off in capital expenditure as the major reason behind it. This has been deemed as a bigger economic fall than 1.5% and is referred to as an instance of how COVID-19 is leaving its impact on each sector of the economy.
Talking about the household spending decline rate, it witnessed a fall of 7.6% in July, which is far more than the forecasted contraction of 3.7% by the median market.
In this regard, the Bank of Japan will probate the rate review using a new bundle of data available in the upcoming week.