Japan’s government slashed its assessment of the economy, downgrading a range of components hit by the coronavirus pandemic as schools were shut, factory production lines halted and the Olympics postponed. In its monthly report for March released Thursday, the Cabinet Office cut its view of the economy, characterizing it as in a “severe situation” and “extremely depressed” by the virus outbreak. It dropped its view that the economy was recovering or moving toward a recovery for the first time since 2013.
The vastly changed assessment indicates the level of concern in Prime Minister Shinzo Abe’s government as it mulls its options for an additional spending package to support businesses and households. Analysts already see the economy in recession and expect it to shrink this year as the virus outbreak hits Japan’s supply chains, exports and consumer spending.
The Cabinet Office report cut the assessment of consumption for the first time in over three years, saying it is “showing weakness,” while it dropped its views on capital expenditure, public investment and import levels. Business conditions and corporate profits were also downgraded. Economy Minister Yasutoshi Nishimura said Thursday a panel will be set up to consider a declaration of emergency in Japan, following Tokyo Governor Yuriko Koike’s plea Wednesday for citizens to stay indoors. A declaration would enable cities to call lockdowns if needed.