Japan’s economy shrinks to record levels for the first time in decades, according to leading macroeconomic influencers

18 August 2020 (Last Updated August 18th, 2020 07:54)

Japan’s economy shrinks to record levels for the first time in decades, according to leading macroeconomic influencers

The third largest economy in the world, Japan’s economy is experiencing the biggest economic downturn in years. Despite fiscal and monetary measures consumption and exports have remained low signalling a deeper recession unless improved policy actions are implemented. Macroeconomic influencers share their views on the Covid -19 impact.

Christophe Barraud

Christophe Barraud, an economist, shared an article on Japan’s economy experiencing the biggest slump in the second quarter of 2020 at 27.8%. The real GDP level of the country has declined to record low levels for the first time in decades despite injecting fiscal stimulus into the economy to deal with the impact of the pandemic.

The decline in Japan’s GDP is being attributed to the decrease in consumption and exports although a rebound is being projected for the July-September quarter. The possibility of a surge in Covid-19 infections has, however, cast doubts on the outlook and highlighted the need for more policy action to prevent the country from going into a deeper recession.

Peter Morici

Peter Morici, an economist, shared an article on how some Americans are shifting from cities such as San Francisco, Los Angeles, Portland, New York and Chicago to regions such as Texas, Tennessee and Florida. Lower taxes, fewer regulations and safer lifestyles have prompted people to shift to these regions.

Cities such as New York have some of the highest income tax rates compared to Florida and Texas, which have no income tax. Americans are choosing to shift rather than pay the high wealth taxes imposed by the government, particularly since the pandemic has provided the option to work remotely.

Stephen King

Stephen King, senior economic adviser to HSBC, shared an article on how foreign workers in the UK are returning to their home countries as the pandemic has wiped out their job prospects particularly the hospitality sector. Although the furlough scheme does cover these workers many depend on tips for their income, which the scheme does not cover and hence chose to return.

Foreign workers in the UK indicate the dynamic nature of the region’s labour market. The exodus of these workers points towards a collapse in economic activity particularly in the hospitality sector, which shrank by 86.7% in the second quarter of 2020.

Lars Christensen

Lars Christensen, an economist, tweeted on how the inflation expectations in the US market have returned to pre-lockdown levels but still remain at below 2%. He noted that the crisis created by the pandemic can no longer be termed as deflationary.

Christensen also noted that a V-shaped recovery for the US economy is underway although the stock market may face tough times in the future.

Howard Archer

Howard Archer, chief economic advisor to EY ITEM Club, shared an article on the UK government providing a second support grant for self-employed people who have been affected by the pandemic.

Chancellor Rishi Sunak announced that this will be the final support grant that will be provided by the government. More than three million people can apply for payment of up to £6,570 each under the scheme.

Although the first support scheme faced some issues due to fraudulent claims, the scheme did reach millions of people. The second round of the scheme is being considered as an alternate to extending the furlough scheme for employed workers.

Certain self-employed people such as directors, freelancers, and newly self-employed, however, are not eligible for the scheme.