An empty shopping area during the coronavirus shutdown in Japan.
Photo: James Matsumoto/SOPA Images/Zuma PressTOKYO—Japan’s economy fell into a recession by one common definition in the first quarter of 2020, with worse expected in the current quarter.
The world’s third-largest economy after the U.S. and China shrank an annualized 3.4% in the January-March period, pushed down by the initial effects of the coronavirus pandemic. That followed a revised 7.3% contraction in the previous quarter that was triggered by an increase in the national sales tax. Two straight quarters of contraction is one definition of a recession.
“The situation has become even more severe in April and May after a state of emergency was issued,” Economy Minister Yasutoshi Nishimura said Monday. “The economy is expected to shrink substantially for the time being.”
Prime Minister Shinzo Abe declared a national state of emergency in April to contain the spread of the coronavirus. Last week, he lifted it in 39 of 47 prefectures. It still applies in Tokyo and Osaka, but is expected to end nationwide in the next week or two.
Many stores and restaurants have closed during the pandemic, while tourism has virtually halted because most foreign visitors are barred from entering the country and Japanese people have been encouraged to avoid travel.
Economists are forecasting a contraction at an annualized pace of 20% or more in the current quarter.
Exports fell at an annual rate of 21.8% in the first quarter, reflecting supply-chain disruptions and lockdowns in China, one of Japan’s biggest markets. Private consumption and capital spending by companies also fell, but not as much.
Daiwa Securities economist Mari Iwashita said exports were likely to fall further with lockdowns continuing in some countries. She said imports might improve as China’s economy moves closer to normal operations and provides Japan with personal computers for people working at home and masks.
Société Générale economist Takuji Aida said that even after Japan’s state of emergency lifts, the pace of economic recovery may be slow because many people may see their income reduced or lose their jobs. “Households and companies are reaching their limits of their strength,” he said.
Mr. Nishimura, the economy minister, said the government planned to put together an additional spending package by about May 27, including further support for corporate financing and aid for students. In April, Parliament passed a measure with some $240 billion in spending, including cash payments of about $935 to every person in Japan.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
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