JAPAN'S economy shrank by 7.8 per cent in the second quarter of the year, making it the worst contraction in the nation's history. This was mainly due to the economic issues caused by the Covid-19 pandemic.
Although the figures released by the government showed that the contraction was the biggest drop for the nation since comparable data was made available in 1980, it was still less than numbers seen by other major economies.
According to a Kyodo News report, Japan's economy had been trending downward even before the pandemic, as it was affected by the United States-China trade spat and a consumption tax hike last year. The pandemic only exacerbated the situation and it is the third straight quarter of negative growth.
However, analysts have forecast that Japan's economy will rebound by over 10 per cent in the third quarter, as economic activity gradually resumes, and believe it will take a few years for the economy to bounce back to pre-pandemic levels.
In a related development, more Japanese companies are looking at expanding businesses in Southeast Asia while scaling down their operations in China as tensions between China and the US continue to rise.
Japan External Trade Organization (Jetro) said in an annual trade and investment report that 41 per cent of Japanese companies are considering expanding operations in Vietnam in the next three years, up by 5.5 per cent from last year.
According to Kyodo News, the report, which used a 2019 survey, also found that less than half the respondents said they would seek to boost business in China, down 7.3 per cent to 48.1 per cent.
"Since 2018, an intensified confrontation between the United States and China has pushed up Japanese companies' investments in the Association of Southeast Asian Nations," the Jetro report said.
It added that the gap between Japanese investments in Asean and China expanded to 20.4 billion yen last year, compared with 10.2 billion yen in 2017.