Tuesday, March 24, 2020

Japan heading for GFC-deep recession?

As is Australia, the big fall in PMIs came in the services sector — airlines, hotels, restaurants.  You can read the full report here.  Note that the decline in the PMI has happened even though Japan has not imposed a lockdown to fight the virus. 

The downward spike in the composite PMI in 2011 was due to the earthquake and the Fukushima disaster, and it was short-lived and didn't drive GDP  to deep negatives.  The fall this time is more like the GFC downturn of  2008/09, and it seems plausible that the downturn in GDP could be as deep this time as it was 12 years ago.  In 2008, Japan hadn't experienced the financial excesses of the USA, yet it still suffered as the US recession dragged the world down with it.  If Japan imposes even a partial lockdown, the domestic slwdown will be added to the foreign impact.  The growth in infections in Japan has been much slower than elsewhere, but they are still rising, so a lockdown can't be ruled out.  Even if all Japan does is to close its borders .....




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