Japan now in fifth Recession since 2008

A Predictable Pratfall
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Japan had fallen into a recession even prior to the COVID-19 coronavirus crisis. With GDP having contracted at an over 6% annual rate the final quarter of 2019, with the added economic impact of the coronavirus it may become severe.

ECRI discusses how their LLI (Long Leading Index) was on to this possibility *ahem* LONG before Japan tossed on yet another tax hike, and the Black Swan of coronavirus hit Asia. BusinessCycle.com reports:

 The Japanese Manufacturing PMI has now dropped to an over-seven-year low, and its services counterpart to a nearly-six-year low, with both PMIs deep in contraction. This is part of a new Japanese recession…

The key point is that, yet again, this recession was triggered by a shock hitting the Japanese economy when it was in a recessionary window of vulnerability, as signaled by good leading indexes. In this case the shock was a legislated tax hike, but what characterizes ECRI’s prescient leading indexes that identify recessionary windows of vulnerability? …

Unlike the U.S. since the financial crisis, Japan’s misfortune is that its economy has been hit by repeated shocks – including the Tohoku earthquake and sales tax hikes – when it was in recessionary windows of vulnerability that policymakers were blind to […]

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