Key Japan indicator drops at fastest pace in nine years, signals steep recession

(C) Reuters. An aerial view shows less than usual passersby seen at a pedestrian crossing at Ginza district in Tokyo

By Kaori Kaneko

TOKYO (Reuters) – A key economic indicator in Japan fell at the fastest pace since 2011 in March and the government warned of a deep recession as the coronavirus crisis takes a heavy toll on business activity and consumer spending.

In Tuesday’s coincident indicator index report, the government maintained its view that the economy was “worsening” in March, backing other data during that month and in April which paint a bleak outlook.

The index of coincident economic indicators, which consists of a range of data including factory output, employment and retail sales, dropped a preliminary 4.9 points to 90.5 in March from the previous month, the Cabinet Office said.

It was the fastest pace of decline since March 2011 when a devastating earthquake, tsunami and nuclear disaster hit Japan.

A Reuters poll forecast showed Japan had already slipped into recession as the health crisis is expected to have led to a second straight quarter of economic contraction in January-March.

Analysts expect an even deeper contraction in the current quarter, as the government’s decision to declare a state of emergency in April kept many citizens at home and forced businesses to close.

Another index for leading economic indicators, which is a gauge of the economy a few months ahead and is compiled using data such as job offers and consumer sentiment, fell 8.1 points to 83.8 from February.

It was the biggest drop on record since comparable data became available from 1985.

The government has already a multi-billion dollar package of stimulus measures to backstop the economy, and on Monday Prime Minister Shinzo Abe signalled readiness to compile a second supplementary budget during the current Diet session running through June.