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Some analysts are worried that Japan’s economic worries aren’t entirely caused by the coronavirus. Bank of America’s Head of Japan Economics, Izumi Devalier pointed out when speaking on Bloomberg that the figures are representative of the whole of Q1 which includes January, February and March. As Japan’s state of emergency was only declared in March, the figures indicate Japan was sliding towards recession in spite of COVID-19.
Japan’s economy despite being ranked number 3 in the world by size has been stagnant for decades when compared to its peers; the US and China.
Japan, like many of its peers in Asia, is beginning to reopen parts of its economy. Some of the state of emergency declarations have been lifted with the gradual process of easing restrictions underway.
However, despite Japan’s economy opening internally, any economic recovery will largely be dependent on what other countries do. What distinguishes Japan from the US is that its economy is built primarily on export revenues. This means any recovery will require a resurgence in global trade.
One of Japan’s most profitable industries is car manufacturing. Firms such as Mazda, Mitsubishi and Toyota have all experienced a significant drop in demand. Toyota confirmed on Tuesday that it expects profits to drop 80% to its lowest in nine years. Japan’s tourism sector has also been decimated in recent weeks with the countries borders remaining closed.