Japan braces for worst postwar economic slump pandemic tests policy response

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Tokyo, June 8 (BNA): Japan’s economy braced for its worst postwar slump even as first-quarter GDP contracted less than initially thought, as the cornonavirus crisis slams the brakes on global growth and raises pressure on Tokyo to cushion the blow to business and consumers.

While U.S. and European policymakers have shifted from crisis-response to efforts to prop up growth, Japan is struggling to do so as it continues to focus on preventing a second wave of infection.

In an interview with Reuters, economy minister Yasutoshi Nishimura said Japan should primarily focus on back-stopping faltering businesses, suggesting the central bank should avoid pushing interest rates deeper into negative territory.

“We’re not at a stage yet where we want to stimulate consumption and encourage people to travel a lot. Efforts to stimulate consumption should wait a bit more,” he said, when asked whether the Bank of Japan should take steps to boost demand, such as deepening negative interest rates, according to Reuters.

The world’s third-largest economy shrank an annualised 2.2% in January-March, revised data showed on Monday, less than the 3.4% contraction indicated in a preliminary reading, as capital expenditure fared better than expected. Analysts had tipped a 2.1% contraction.