Viewing offline content

Limited functionality available

Dismiss
Deloitte Middle East
Annotations
  • Services

    What's New

    • Deloitte175

      Join us for a celebration of 175 years of making an impact that matters.

    • Building the Resilient Organization

      2021 Deloitte Global resilience report

    • 2020 Global Gender Impact Report

      A collection of Butterfly Effect stories highlighting how our Deloitte professionals are positively impacting the lives of women and girls around the world

    • Audit & Assurance

      • Assurance
    • Consulting

      • Strategy, Analytics and M&A
      • Customer and Marketing
      • Business Operations
      • Human Capital
      • Enterprise Technology & Performance
    • Financial Advisory

      • Mergers & Acquisitions
      • Forensic
      • Real Estate
      • Turnaround & Restructuring
    • Risk Advisory

      • Strategic & Reputation Risk
      • Regulatory Risk
      • Financial Risk
      • Operational Risk
      • Cyber Risk
    • Tax

      • Global Business Tax Services
      • Indirect Tax
      • Global Employer Services
    • Deloitte Private

      • Family Enterprise
    • Legal

    • Sustainability

  • Industries

    What's New

    • Deloitte perspectives

      Leadership perspectives from across the globe.

    • Deloitte Insights App

      Our thought leadership and Dow Jones news, now at your fingertips

    • Future of Mobility

      Learn how this new reality is coming together and what it will mean for you and your industry.

    • Consumer

      • Automotive
      • Consumer Products
      • Retail, Wholesale & Distribution
      • Transportation, Hospitality & Services
    • Energy, Resources & Industrials

      • Industrial Products & Construction
      • Mining & Metals
      • Oil, Gas & Chemicals
      • Power, Utilities & Renewables
    • Financial Services

      • Banking & Capital Markets
      • Insurance
      • Investment Management
      • Real Estate
    • Government & Public Services

      • Civil Government
      • Defense, Security & Justice
      • Health & Social Care
      • Transport
    • Life Sciences & Health Care

      • Health Care
      • Life Sciences
    • MENA Sovereign Wealth Funds

    • Technology, Media & Telecommunications

      • Technology
      • Telecommunications, Media & Entertainment
  • Insights

    Deloitte Insights

    What's New

    • Deloitte Insights Magazine

      Explore the latest issue now

    • Deloitte Insights app

      Go straight to smart with daily updates on your mobile device

    • Weekly economic update

      See what's happening this week and the impact on your business

    • Strategy

      • Business Strategy & Growth
      • Digital Transformation
      • Governance & Board
      • Innovation
      • Marketing & Sales
      • Private Enterprise
    • Economy & Society

      • Economy
      • Environmental, Social, & Governance
      • Health Equity
      • Trust
      • Mobility
    • Organization

      • Operations
      • Finance & Tax
      • Risk & Regulation
      • Supply Chain
      • Smart Manufacturing
    • People

      • Leadership
      • Talent & Work
      • Diversity, Equity, & Inclusion
    • Technology

      • Data & Analytics
      • Emerging Technologies
      • Technology Management
    • Industries

      • Consumer
      • Energy, Resources, & Industrials
      • Financial Services
      • Government & Public Services
      • Life Sciences & Health Care
      • Technology, Media, & Telecommunications
    • Spotlight

      • Deloitte Insights Magazine
      • Press Room Podcasts
      • Weekly Economic Update
      • COVID-19
      • Resilience
  • Careers

    What's New

    • Millennial Survey 2022

      Gen Zs and millennials are striving for balance and advocating for change.

    • Candidate Profile

      After applying for a job in this country, you can access/update your candidate profile at any time.

    • Job Search

    • Students

    • Experienced Hires

    • Executives

    • Life at Deloitte

    • Alumni

    • Diversity and Inclusion

  • XE-EN Location: XE-English  
  • Contact us
  • XE-EN Location: XE-English  
  • Contact us
    • Dashboard
    • Saved items
    • Content feed
    • Profile/Interests
    • Account settings

Welcome back

Still not a member? Join My Deloitte

Japan

by Ira Kalish
  • Save for later
  • Share
    • Share on Facebook
    • Share on Twitter
    • Share on Linkedin
    • Share by email
Deloitte Insights
  • Strategy
    Strategy
    Strategy
    • Business Strategy & Growth
    • Digital Transformation
    • Governance & Board
    • Innovation
    • Marketing & Sales
    • Private Enterprise
  • Economy & Society
    Economy & Society
    Economy & Society
    • Economy
    • Environmental, Social, & Governance
    • Health Equity
    • Trust
    • Mobility
  • Organization
    Organization
    Organization
    • Operations
    • Finance & Tax
    • Risk & Regulation
    • Supply Chain
    • Smart Manufacturing
  • People
    People
    People
    • Leadership
    • Talent & Work
    • Diversity, Equity, & Inclusion
  • Technology
    Technology
    Technology
    • Data & Analytics
    • Emerging Technologies
    • Technology Management
  • Industries
    Industries
    Industries
    • Consumer
    • Energy, Resources, & Industrials
    • Financial Services
    • Government & Public Services
    • Life Sciences & Health Care
    • Tech, Media, & Telecom
  • Spotlight
    Spotlight
    Spotlight
    • Deloitte Insights Magazine
    • Press Room Podcasts
    • Weekly Economic Update
    • COVID-19
    • Resilience
    • XE-EN Location: XE-English  
    • Contact us
      • Dashboard
      • Saved items
      • Content feed
      • Profile/Interests
      • Account settings
    3 minute read 20 March 2020

    Japan Economic slowdown

    3 minute read 20 March 2020
    • Ira Kalish United States
    • Ira Kalish United States
    • Save for later
    • Share
      • Share on Facebook
      • Share on Twitter
      • Share on Linkedin
      • Share by email
    • Coronavirus
    • Japanese consumers
    • Industry
    • Pensions

    ​A combination of soft consumer demand, weak sentiment, the coronavirus outbreak, and global trade troubles has decelerated the economy, and there appears to be little the government can do currently.

    Even before the coronavirus started to disrupt Japanese manufacturing supply chains, Japan’s economy had faltered following the imposition of a higher national sales tax in October 2019. Specifically, the government reported that, in the fourth quarter of 2019, real GDP fell at an annualized rate of 6.3 percent from the previous quarter. This was the steepest decline since 2014, which is when the last increase in the national sales tax took place. In October 2019, the tax was increased from 8 percent to 10 percent, and consumer spending had surged in anticipation of the increase. In the fourth quarter, consequently, consumer spending fell at a rate of 11.1 percent. Business investment fell at a rate of 14.1 percent. Exports, however, only declined at a rate of 0.4 percent, likely due to the impact of the US-China trade dispute. One indication that the economy is decelerating is that the labor market is loosening—the jobs-to-applications ratio fell in January to 1.49, the lowest since May 2017.

    Learn more

    Learn how to combat COVID-19 with resilience

    Explore the Economics collection

    Learn about Deloitte's services

    Go straight to smart. Get the Deloitte Insights app

    In Japan, the manufacturing Purchasing Managers’ Index (PMI) for February declined to 47.6, the lowest since 2014, reflecting a sharp decline in manufacturing activity. In addition, the services PMI declined sharply from 51.0 in January to 46.7 in February. This level indicates a rapid decline in services activity. The economy was already facing significant headwinds even before the coronavirus crisis. Yet, as Markit indicated in its commentary, “the coronavirus outbreak has hit tourism particularly hard in Japan, a key source of demand for services.” Markit suggested that the latest PMI readings mean that the economy may not grow at all in the first quarter. The weak PMIs for February follow improved numbers in January. This indicates that, without the coronavirus crisis, the Japanese economy was likely rebounding as the year began. Markit commented that the January PMIs suggested a “domestic-led recovery,” with consumer spending driving continued growth in the services sector. In addition, it noted that demand in the semiconductor sector was picking up, fueling an improvement in manufacturing. It also noted an improvement in manufacturing sentiment in the wake of the US-China phase-one trade deal and reduced tensions with South Korea.

    Coronavirus

    Before the coronavirus, there had been a widespread expectation that real GDP would rebound in the first quarter of this year. However, the outbreak indeed led to uncertainty that affected manufacturing supply chains. As a result, it is possible that GDP could contract again in the first quarter, thereby placing Japan in a recession. A government spokesman said that the government is prepared to spend from its reserve fund in order to offset the negative impact of the virus on supply chains and inbound tourist expenditures.

    Meanwhile, the government has ordered local schools to remain closed until mid-April. This action is meant to quell the spread of the coronavirus. This action will likely create some degree of disruption for parents as they seek alternative childcare. Prime Minister Abe said, “We need to place top priority on the health and safety of our children and take measures to stem the risk of many children and teachers becoming infected through gathering for long hours every day.” This action follows cancellation of major public events, including concerts and sporting events.

    Japanese consumers

    Household spending fell sharply in December from a year earlier. This was the third consecutive monthly fall. Evidently, the consumer side of the Japanese economy is weakening at a time when the industrial side has already been hurt by the global economic slowdown and the US-China trade dispute. Moreover, it is likely to experience stress emanating from the disruptive effects of the coronavirus. Household spending had declined sharply in October following implementation of a higher national sales tax. However, the continued decline in November and December 2019 is concerning. In December, spending fell 4.8 percent from a year earlier. This included a 13.3 percent decline in spending on furniture, 11.1 percent for clothing, and 17.4 percent for housing.

    Meanwhile, retail sales fell 0.4 percent in January versus a year earlier. This was the fourth consecutive month of declining retail sales, although the January figure was actually relatively modest compared to recent months.

    Industry

    Japan’s industrial sector continues to decline. In January, industrial production was down 2.5 percent from a year earlier. Output has declined in 10 of the last 12 months, although it was up 0.8 percent from December to January. That was due to a big increase in automotive production. However, it might be the case that production declined in February given the disruption to global supply chains stemming from the coronavirus outbreak.

    Pensions

    Prime Minister Abe said that, in addition to recent tax increases, the government plans to take other steps to sustain the country’s pension system. These will include encouraging people to work longer, requiring pensioners to pay a larger share of their medical costs, and encouraging people to be less reliant on the government pension system for their living costs. The tax increase that took effect last year will be used, in part, to fund an increase in childcare support, thereby encouraging more women to participate in the workforce. The aim is to boost the ratio of workers to retirees. This is essential given that roughly a third of Japan’s population is over 65 and the birth rate remains at a record low.

    Acknowledgments

    Cover image by: Tushar Barman

    Topics in this article

    Economics , Japan , Asia Pacific (APAC) Economics , Asia Pacific (APAC)

    Deloitte Global Economist Network

    The Deloitte Global Economist Network is a diverse group of economists that produce relevant, interesting and thought-provoking content for external and internal audiences. The Network’s industry and economics expertise allows us to bring sophisticated analysis to complex industry-based questions. Publications range from in-depth reports and thought leadership examining critical issues to executive briefs aimed at keeping Deloitte’s top management and partners abreast of topical issues.

    Learn more
    Get in touch
    Contact
    • Dr. Ira Kalish
    • Chief global economist
    • Deloitte Touche Tohmatsu Limited
    • ikalish@deloitte.com
    • +1 213 688 4765

    Download Subscribe

    Related content

    img Trending

    Global economic outlook 2021

    Podcast 1 year ago
    img Trending

    Asian consumers

    Article 2 years ago
    img Trending

    Five themes that will drive Asian growth in 2020

    Article 2 years ago
    img Trending

    Retirees of the future

    Article 2 years ago

    More from the Economics collection

    • The economic impact of COVID-19 (novel coronavirus) Article2 years ago
    • A view from London Article17 hours ago
    • Will they, or won’t they return? Addressing the postpandemic labor force deficit Article1 year ago
    • Global Weekly Economic Update Article1 week ago
    • All in a day’s work—and sleep and play: How Americans spend their 24 hours Article3 years ago
    • Voice of Asia Collection
    Ira Kalish

    Ira Kalish

    Chief Global Economist, Deloitte Touche Tohmatsu

    Dr. Kalish is the Chief Global Economist of Deloitte Touche Tohmatsu Ltd. He is a specialist in global economic issues as well as the effects of economic, demographic, and social trends on the global business environment. He advises Deloitte clients as well as Deloitte’s leadership on economic issues and their impact on business strategy. In addition, he has given numerous presentations to corporations and trade organizations on topics related to the global economy. He is widely traveled and has given presentations in 47 countries on six continents. He has been quoted by the Wall Street Journal, The Economist, and The Financial Times. Dr. Kalish holds a bachelor’s degree in economics from Vassar College and a PhD in international economics from Johns Hopkins University.

    • ikalish@deloitte.com
    • +1 310 420 0392

    Share article highlights

    See something interesting? Simply select text and choose how to share it:

    Email a customized link that shows your highlighted text.
    Copy a customized link that shows your highlighted text.
    Copy your highlighted text.

    Japan has been saved

    Japan has been removed

    An Article Titled Japan already exists in Saved items

     
    Forgot password

    To stay logged in, change your functional cookie settings.

    OR

    Social login not available on Microsoft Edge browser at this time.

    Connect Accounts

    Connect your social accounts

    This is the first time you have logged in with a social network.

    You have previously logged in with a different account. To link your accounts, please re-authenticate.

    Log in with an existing social network:

    To connect with your existing account, please enter your password:

    OR

    Log in with an existing site account:

    To connect with your existing account, please enter your password:

    Forgot password

    Subscribe

    to receive more business insights, analysis, and perspectives from Deloitte Insights
    ✓ Link copied to clipboard
    • Contact us
    • Search Jobs
    • Submit RFP
    Follow Deloitte Insights:
    Global office directory Office locations
    XE-EN Location: XE-English  
    About Deloitte
    • Newsroom
    • Deloitte events
    • Our blog collections
    • Press releases
    • Press contacts
    • Corporate Responsibility & Sustainability
    • Report an ethics complaint
    Services
    • Audit & Assurance
    • Consulting
    • Financial Advisory
    • Risk Advisory
    • Tax
    • Deloitte Private
    • Legal
    • Sustainability
    Industries
    • Consumer
    • Energy, Resources & Industrials
    • Financial Services
    • Government & Public Services
    • Life Sciences & Health Care
    • MENA Sovereign Wealth Funds
    • Technology, Media & Telecommunications
    Careers
    • Job Search
    • Students
    • Experienced Hires
    • Executives
    • Life at Deloitte
    • Alumni
    • Diversity and Inclusion
    • About Deloitte
    • About Deloitte in the Middle East
    • Privacy
    • Terms of use
    • Cookies
    • Avature Privacy

    © 2022. See Terms of Use for more information.

    Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see About Deloitte to learn more about our global network of member firms.