Japan's Economy Worsens, Braces For Recession This Year

The economy of Japan - the world's third-biggest - is on the verge of recession after it shrank by more than 6.3 percent in the final month last year. 

The country's tourism sector has already taken heavy blows, with worries that a weak global financial market may have a severe impact for it's hosting of the Olympic Games in Tokyo in July.

Japan's gross domestic product plunged 6.4 percent in the final quarter of 2019, government figures showed late Monday, marking its fastest pace in a median market estimate for a 3.8 percent decline and the first drop in more than 15 months.

The data is the biggest slide since middle of 2014, when consumption plunged following a sales tax increase in April of the same period.

Analysts surveyed had projected a drop of almost 4 percent, and the worse-than-estimated results indicated some of the government's optimism on efforts to ease the impact of the tax hike was mislaid.

According to Dutch Bank ING, consumer spending, which plummeted after the tax hike, will now be hard-pressed to do anything except slide further in the first quarter. Some government spending may help absorb any further retreat in the country's GDP beyond the first three months this year.

In Singapore, the government reduced its economic growth estimates for the current year, as Thailand reported its slowest growth in five years, while China's real property prices inched at their weakest pace in nearly two years.

In the stock market, Japanese shares were down on the recession prospects with the benchmark Nikkei Average shedding 0.8 percent, late Monday.

Mari Iwashita, chief market analyst at Daiwa Securities, said she is bracing for another slide in Japan's first quarter. "There just are not any strong indications to build a positive growth outlook," she said, adding that the economy is likely to collapse into recession. Economists define recession as two consecutive quarters of economic contraction.

Moody's ratings agency has downgraded Japan's global growth outlook to 2.5 percent this year from its previous projections of 2.7 percent. China's economy, on the other hand, is currently expected to expand 5.3 percent, down from 6.2 percent last December.

Japanese economists had warned that the country's economy will be hit by a contraction as the sales tax hike, natural calamities and the China-US trade war affected its factory output.

Still, the sluggishness in capital expenditure - seen as among the few strong points in the economy - casts concerns on the Bank of Japan's perception that growth will be achieved as solid local demand offsets falling exports.