Japan's GDP set for biggest drop since 2014
Fundamental Forex Analysis

Japan’s GDP set for biggest drop since 2014

Japan’s economy likely suffered its biggest economic contraction since 2014 at the end of the last year and could drop into recession in the first quarter of 2020 due to coronavirus outbreak. 

The gross domestic product (GDP) growth rate is forecasted to have contracted by 3.8% in the fourth quarter of 2019 mainly due to a sharp drop in consumer spending.

Economists estimate that consumer expenditure fell 7.8% in the fourth quarter, alongside declines in business investment and exports, according to Bloomberg. 

Consumers may have tightened their purse strings in response to the consumption tax hike. Japan increased its consumption tax from 8% to 10% in October, the first hike in five years in October.  

“Japan’s underlying economy isn’t on a firm footing to start with, so growth can be easily pushed into negative territory if something like the coronavirus happens,” said Hiroshi Miyazaki, an economist at Mitsubishi UFJ Morgan Securities.

A negative GDP print for the first quarter would confirm recession – negative growth rate for two consecutive quarters or more. 

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