Japan has fallen into recession as the financial toll of the coronavirus continues to escalate.
The world’s third biggest economy shrank 3.4% in the first three months of 2020 compared to a year ago, its biggest slump since 2015.
The coronavirus is wreaking havoc on the global economy with an estimated cost of up to $8.8tn (£7.1tn).
Last week, Germany slipped into recession as more major economies face the impact of sustained lockdowns.
Japan didn’t go into full national lockdown but issued a state of emergency in April severely affecting supply chains and businesses in the trade-reliant nation.
The 3.4% fall in growth domestic product (GDP) for the first three months of 2020, follows a 6.4% decline during the last quarter of 2019, pushing Japan into a technical recession.
Stimulus package announced
Consumers have been hit by the dual impact of the coronavirus and a sales tax hike to 10% from 8% in October.
While Japan has lifted the state of emergency in 39 out of its 47 prefectures, the economic outlook for this current quarter is equally gloomy.
Analysts polled by Reuters expect the country’s economy to shrink 22% during April to June, which would be its biggest decline on record.
The Japanese government has already announced a record $1 trillion stimulus package, and the Bank of Japan expanded its stimulus measures for the second straight month in April.
Prime minister Shinzo Abe has pledged a second budget later this month to fund fresh spending measures to cushion the economic blow of the pandemic.
Other economies see gloom
Last week, the Asian Development Bank (ADB) warned the global economy could face a hit of between $5.8tn and $8.8tn due to the coronavirus pandemic.
The US economy, the world’s largest, suffered its sharpest decline in the first quarter of 2020 since the Great Depression, falling 4.8%.
China, the world’s second largest economy, saw economic growth shrink 6.8% in the first three months of the year, its first quarterly contraction since records began.
Both of those economies haven’t yet been confirmed as having fallen into a technical recession, which is defined as two consecutive quarters of negative growth, but most economists expect them to in the coming months.
S&P US chief economist: How we can add $5.7 trillion to the US economy – CNN
Restarting The American Economy: The Most Essential Factors – Forbes
When governors and the federal government made the decision to close “non-essential” businesses and issue shelter-at-home orders to slow the spread of COVID-19, they did so without the benefit of a historical precedent. We are only now beginning to understand some of the ramifications of this drastic action. As the U.S. moves to unshackle its economy, millions of workers sit nervously waiting for a call from their employer. Though some workers have returned or hired on with companies that have thrived during this pandemic, others may never get ‘the call’ as companies restructure. You see, a crisis provides an opportunity (and motivation) for companies to reevaluate their business model in search of ways to cut expenses and increase profits. This is because success depends on how well a company can meet the needs of its consumers (revenue) and how well it manages its expenses. The difference between revenue and expenses is profit, which is the driving force behind the private sector. Profit is the lifeblood of every business and it is this lifeblood that is under attack.
How quickly will the U.S. economy return to normal? The answer is ‘it depends.’ It depends on how fast the unemployment rate falls. It depends on how quickly the consumer returns to their pre-COVID level of spending. It depends on the path of the virus. In essence, it depends on a myriad of variables. Let’s begin with unemployment as this will determine the level of economic growth over the next 12 to 18 months.
The official number of unemployed workers is now slightly over 41 million. This is substantially higher than the 5.75 million unemployed at the end of 2019. The current number of unemployed workers represents approximately 26% of the ‘pre-COVID-19’ work force. The unemployment rate hit 14.7% in April, the highest figure since the 24.9% rate during the Great Depression. According to some sources, unemployment is expected to reach 25.2% by the end of this year. Unlike the depression, however, the cause of this downturn is known, and the policy response has been more on point. Even so, can the U.S. economy return to normal with so many workers on the sidelines?
Slower Return to Normal?
Roughly 70% of the U.S. economic engine comes from consumer spending. Thus, when the consumer is actively engaged, the economy tends to prosper. Remove an additional 35 million consumers from the work force and, well, the economy suffers. More importantly, debt plays a vital role in economic growth. When consumers borrow, they spend more, which leads to growth. When you look at the level of total credit issued from all commercial banks since 1973, the average increase from one month to the next was 0.6%. In March and April of this year, the increase was 2.8% and 3.3% respectively. However, this was due to a 25% rise in commercial and industrial lending, much of which is attributable to the Paycheck Protection Program.
What about the largest driver of economic growth? Loans to consumers, which averaged a 0.5% increase from month to month since 1973, fell 3.5% in April. This is the largest monthly decline on record. This reduction in consumer lending has led to weaker consumer spending and slower economic growth. In fact, from March 1 to the end of April, consumer spending – as measured by personal consumption expenditures, fell nearly 20%. If you reduce the volume of loans to consumers – again, the largest contributor to GDP consumer spending falls and the economy slows. Therefore, we must find a way to help the consumer regain what they lost from the shutdown.
What else will affect the return to normal? It starts with demand, which, due to the shutdown, has plummeted. This is why the federal government, the Treasury, and the Fed embarked on a massive stimulus program to put money into the hands of Americans. However, since a one-time payment of $1,200 per individual and $500 per dependent won’t go very far, the federal government added a $600 per month bump in unemployment benefits.
The segment that benefits most from this are workers at the lower end of the income scale. Assuming these unemployed workers are receiving a total benefit of $800 per week ($200 state; $600 fed), this equates to over $41,000 per year. Working for $15 per hour, 40 hours a week, 52 weeks per year, yields $31,200 in gross income. Therefore, where is the incentive to return to a lower paying job? Unless extended, the $600 federal stipend will end July 30. This could lead to a flood of workers seeking reemployment. But how many of these jobs will be filled by then?
Safety concerns are key to consumer demand, which is key to the reemployment of the unemployed. How fast will the consumer reengage? Will there be a second wave of the virus? Will the virus mutate, hindering efforts to develop a vaccine? Regardless, some businesses will permanently close, others will reopen more slowly than expected, and many will look vastly different. Technology will assist those who continue working from home and replace jobs in some industries.
The ‘return to normal’ boils down to how well businesses adapt to this rapidly changing environment and become profitable again. A prosperous business community is necessary for a plentiful job market, which is critical for a thriving economy. If businesses fail to thrive, workers will have fewer employment options and unemployment could remain elevated for longer than necessary. Thus, saving our businesses may be the most important task of all, outside of the virus that is.
Province considering a regional approach to reopening economy – Tbnewswatch.com
TORONTO, Ont. – With the province reaching what the Ontario government is calling the post-peak phase of the fight against COVID-19, Premier Doug Ford said he is considering taking a regional approach to reopening the economy.
“I am now comfortable with asking our officials to look at a regional approach for a staged reopening,” Ford said during his daily media briefing on Friday.
“This will be one option we consider as we move into stage two. This is one option we are putting on the table. We are only able to do this now because we are able to get our testing to where we need it so the health officials are looking right now at what a regional model could look like.”
Previously, Ford had been adamant that reopening the economy would be a province-wide approach, but as testing continues to increase throughout Ontario, with daily tests approaching more than 18,000, Ford said there is a much clearer understanding of where outbreaks are taking place.
“The reality on the ground is very different across any parts of the province,” he said. “We are now getting a much better picture of what each region is dealing with. With more testing that picture becomes more and more clear.”
The province entered stage one of its three-stage framework for reopening last week, allowing certain businesses to open their doors with strict workplace guidelines in place.
“Let me be very clear, I am not prepared to take unnecessary risk when it comes to our health and safety,” Ford said. “We will continue to take a measured and cautious approach.”
What the approach will look like in terms of a regional reopening is to be determined by the province’s chief medical officer of health and the COVID-19 command table.
“We are looking at our table of how we would do regional opening,” said Dr. David Williams, the province’s chief medical officer of health. “What we’ve seen in the data lately, we are getting a picture of what is happening live time. A lot of our cases are focusing around the GTA. Some of our health units are not seeing any cases for two or three weeks in a row and that is very encouraging.”
But Williams added there still needs to be considerations taken to protect vulnerable remote communities, such as First Nations communities in Northern Ontario.
“We have to look at that and see where the cases are occurring,” Williams said. “One of the aspects we have to be careful of in our regionalization is we want to make sure that if cases are introduced or came back again and are further out, we are very concerned about the north, especially remote First Nation communities that we are very attentive to.”
“It’s not just some numbers at some time, it’s the wider picture we have to consider.”
In terms of when the province will enter stage two of reopening, whether it’s regional or province-wide, will depend on testing and the number of cases.
“We developed a plan very early on for three stages of opening,” said Minister of Health Christine Elliott. “That is very important from a public health perspective. We are just now starting to see cases from the gradual reopening of our economy as part of stage one.”
“That will be thoroughly examined and we will decide when we should open up to stage two. The regionalization is a separate issue. The timing of the stages won’t be. That will be based on the number of new cases, the hospital capacity, the contact tracing. All of those things have to come together for the command table to feel that it is safe and make that recommendation.”
S&P US chief economist: How we can add $5.7 trillion to the US economy – CNN
Edmonton Oilers’ Leon Draisaitl proud to win Art Ross, eager to keep building his game – Globalnews.ca
Laurentian Bank cuts dividend by 40% – CBC.ca
- Media17 hours ago
Trump threatens to remove 'shield' protecting social-media giants from liability for online content – The Globe and Mail
- Media14 hours ago
Creators of 6ixBuzz possibly doxed via social media – insauga.com
- Science21 hours ago
Tesla’s Musk earns $770M in stock options, company confirms
- News23 hours ago
Canada, allies condemn China on Hong Kong law after contentious Meng ruling – CBC.ca
- Tech20 hours ago
Toronto-based duo create custom puzzles
- Health21 hours ago
Three New COVID-19 Cases In Campbellton Region
- Media21 hours ago
Donald Trump justify his social media crackdown
- Media8 hours ago
Creators of 6ixBuzz possibly doxed via social media – inbrampton.com