Japan's Gross Domestic Product Contracted in the Fourth Quarter

Ibeth Rivero
Ibeth Rivero
on February 17, 2020 | Updated On Feb 17, 2020
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Japan Gross Domestic ProductAccording to data released by the Japanese government, the Japanese GDP contracted at its faster pace in six years. The Japanese gross domestic product went down by 6.3 percent in the last quarter of 2019, the biggest contraction since the second quarter of 2014, against the analyst's expectations, who foresaw a 3.7 percent contraction.

This negative economic data can be linked to the coronavirus epidemic, together with the downside effects of the tax hike that was implemented by the government in order to deal with the huge fiscal deficit. On its latest monetary policy statement, the Bank of Japan stated that they expected the economy to keep expanding moderately, however, this recent data casts doubts over this forecast.

Industrial output went up by 1.2 percent in December, a significant improvement from the previous month's 1 percent fall, and the first rise in output since September. Industrial production was mostly driven up by an increase in the output of general-purpose machinery, electronic parts and devices, and production machinery. On the other side, transport equipment, information and communication electronics equipment, and motor vehicle output went down.

By 9:47 GMT the US dollar rose against the Japanese Yen by 0.12 percent, hitting the 109.88 level. Conversely, the Euro gained 0.21 percent against the Yen, at 119.15.

Coronavirus numbers are stark: capital economics

Meanwhile, the coronavirus death toll went up to 1,770 according to the National Health Commission data, with around 70,500 reported cases.

An analyst at capital economics recently stated that the coronavirus outbreak effects on the Chinese economy are "stark."

"The numbers are stark. Passenger traffic in China is down by around 60% compared to the same period around the Lunar New Year holiday last year. Property sales have collapsed. And energy consumption has failed to rebound following its usual drop over the holiday period,” said Neil Shearing, an analyst at Capital Economics.

The analysts also highlighted that there is evidence that the effects of the outbreak are expanding to other economies through the supply chain and that they expect a fall in the Chinese output of 2.5 percent in the first quarter of this year. It's still not clear whether the economic activity would rebound at a fast pace or whether the lost output will be fully recovered.

“If workplaces reopen soon, we think activity should rebound relatively quickly with lost output recovered over the rest of this year," he continued, " But a prolonged shutdown could mean lost output is never recovered,” he added.

By 10:01 GMT the Chinese Yuan went up by 0.08 percent against the US dollar, at 0.1433.

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About the Author
Ibeth Rivero

Ibeth contributes daily market commentary in both English and Spanish (both of which she speaks fluently) and she also manages the DailyForex mobile app to ensure that traders around the world are getting important market updates in real time.

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