by Michael Snyder, The Economic Collapse Blog:

Global economic conditions are really starting to deteriorate quite rapidly.  Economists were projecting that Japan’s GDP would shrink by 3.8 percent on an annualized basis in the fourth quarter, but instead it greatly surpassed expectations by plunging 6.3 percent.  If Japan’s GDP falls again during the first quarter of 2020, and thanks to the coronavirus outbreak that seems very likely, then the world’s third largest economy will officially be in a recession.  But of course the outlook for China is even worse.  At this point, economic activity in China has come to a standstill, and this has thrown global supply chains into a state of chaos.  It certainly appears that the entire global economy will shrink during the first quarter, and that will be the very first time that has happened in more than a decade.  And if this coronavirus outbreak continues to intensify in the months ahead, the economic consequences are going to be absolutely catastrophic.

Even though the experts were anticipating a slowdown in Japan, nobody had any idea that it would be this bad…

Japan’s gross domestic product shrank at an annualized pace of 6.3 percent from the previous quarter in the three months through December, according to a preliminary estimate by the Cabinet Office released Monday.

Economists surveyed had predicted a fall of 3.8 percent, flagging the adverse impact of a sales tax increase, weak global demand and typhoon disruption.

The sales tax increase is being primarily blamed for this collapse in GDP, and without a doubt consumer spending in Japan was way down last quarter…

Consumer spending fell 11.1% after the national sales tax was raised in October to 10% from 8%. During the same month, Typhoon Hagibis ravaged a large swathe of the country.

Capital spending declined 14.1% and exports slipped 0.4% due to the fallout from the U.S.-China trade war.

Japanese officials were hoping that GDP would bounce back this quarter, but now the coronavirus outbreak has changed everything.

At this point it is very difficult to be positive about the immediate future of the Japanese economy, and an increasing number of experts are now anticipating a recession.  Here is one example…

“I’m getting ready for another contraction in Japan’s first quarter. There just aren’t any positive factors to build a positive growth forecast,” said Mari Iwashita, chief market economist at Daiwa Securities Co., flagging her view that the economy is likely falling into recession.

The Japanese economy greatly benefits from the horde of tourists that usually come over from China, and the two nations have developed a very close trading relationship.

Now that those two factors are being disrupted, the outlook for the second quarter is decidedly grim…

“There is a good chance of Japan’s economy falling into a recession,” Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, said before Monday’s data was released. He flagged the risks of supply chains being affected if the outbreak was prolonged.

The coronavirus is taking a toll on the number of Chinese tourists to Japan and manufacturing activity due to the economy’s close ties with China, prompting some economists to forecast a contraction lasting two quarters.

Ultimately, it is going to be exceedingly difficult for Japan to avoid a recession.

But if Chinese GDP also plunges into recession territory this year, that will be even bigger news.

According to the New York Times, “the entire global economy could suffer from a prolonged shock in China”, and so investors will be watching the development of this crisis very carefully.

The number of confirmed cases and the official death toll both continue to rise, and the draconian measures that the Chinese have taken to contain the outbreak have slowed the Chinese economy to a crawl.  The following is how Zero Hedge summarized the recent economic data that we have seen come out of China…

While not perfect, and certainly not a comprehensive view of what is really taking place “on the ground”, the above data is a useful real-time indicator of how the people in China perceive the threat of the coronavirus pandemic, and one thing is abundantly clear: as the pandemic spreads further without containment, and as the charts above flatline, so will China’s economy, which means that while Goldman’s draconian view of what happens to Q1 GDP is spot on, the expectation for a V-shaped recovery in Q2 and onward will vaporize faster than a vial of ultra-biohazardaous viruses in a Wuhan virology lab.

Of course many in the financial world are still hoping that things won’t be too bad.

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