TOKYO- Japan’s economy will shrink at the fastest pace in decades in the year through March 2021, forcing the government to compile another stimulus package to cushion the blow from the coronavirus pandemic, a Reuters poll showed on Friday.
Many respondents predicted the Bank of Japan’s (BOJ’s) next policy step would be to expand stimulus, but they do not see the pandemic triggering a banking sector crisis this year.
The world’s third-largest economy is forecast to contract 5.3 percent this fiscal year, a July 3-9 poll of over 30 economists shows, the most it has shrunk since comparable data became available in 1994.
It will rebound 3.3 percent next year, according to the poll.
The economy will grow at an annualized 10.0 percent pace in the current quarter of the calendar year 2020 after having shrunk 23.9 percent in the second quarter ended June, the poll shows.
“It would take two to three years for economic activity to return to normal levels in Japan as its overseas markets are likely to continue suffering from the spread of the virus,” said Atsushi Takeda, chief economist at Itochu Research Institute.
Two-thirds of economists polled expect Japan to compile its next stimulus package this year to ease the pain on companies and households. Japan has so far rolled out two packages totaling $2.2 trillion.
Arata Oto, market economist at Societe Generale Securities Japan, expects the next stimulus package to be worth about 1-2 percent of the country’s gross domestic product.
The package “would aim at accelerating Japan’s recovery … once there are more signs the pandemic is beginning to subside, or to help further cushion the blow from COVID-19 if the likelihood of a second wave heightens”, he said.
Globally, more than 12 million have been infected by the virus and over half a million people have died. In Japan, more than 21,000 people have been infected and over 900 killed.
