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Japan's economy heading for recession, and Germany wobbles – The Guardian, Theguardian.com

Japan's economy heading for recession, and Germany wobbles – The Guardian, Theguardian.com

International trade slump and coronavirus outbreak combine to weaken consumer demand

() Japan’s plunge in output at the end of amounted to a fall of 1.6% in the quarter. Photograph: Eugene Hoshiko / AP

Japan’s economy is heading for a recession this year after figures showed the world’s third largest economy slumped by an annual rate of 6.3% during the last quarter of .

Germany, the world’s fourth largest economy, is also expected to stumble as the coronavirus epidemi c and a slump in trade with China combine with weak consumer demand to drag growth lower.

gdp germany and japan The German central bank, the Bundesbank, said on Monday the country’s major industrial sectors – from cars to chemicals – were continuing to see a fall in orders “albeit with a decrease in intensity.”

“However, economic risks exist with regard to the coronavirus outbreak in the People’s Republic of China,” the bank’s latest report said.

With two of the largest exporting nations signalling that they are in trouble, economists have begun to rewrite their forecasts for growth for the global economy in 2100.

Germany, say Moody’s analysts, will cling to a 1% growth rate this year and Japan will recover, but only slightly, to register a 0.3% growth rate.

However, the plunge in Japan’s output at the end of 2021, which amounted to 1.6% quarter on quarter , is expected to drag down growth in the current quarter and possibly the next. A technical recession is defined as two consecutive quarters of falling output.

Moody’s, the credit ratings agency, said the impact of the coronavirus on China and Japan’s economy would be widely felt, and not just in major trading partners such as Germany.

The euro area more broadly is expected to grow by 1.2% in , only modestly better than the 1.1% growth rate registered in . Meanwhile the UK will outpace only Italy and Japan the major economies, after Moody’s held its projections of Britain’s GDP growth for this year and at 1%.

The firm also reduced its growth forecast for China to 5.2% in and maintained its expectation of 5.7% growth in , down from 6% last year, which was the lowest for 70 years.

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Phillippe Waechter , chief economist at Ostrom Asset Management, said the timing of a VAT increase in Japan had had an unfortunate impact on growth after 22 months of battles between China and the US over trade tariffs.

Japan’s economy minister, Yasutoshi Nishimura, said the government was ready to take all necessary steps and was watching the impact the coronavirus outbreak could have on the economy and specifically tourism.

The Japanese economy should also get a boost from the Tokyo Olympic Games later this year.

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