The media reports that Japan’s GDP plunged at a 6.3% annual rate in the 4th quarter of 2019.  Here’s the Financial Times headline and subhead:

Japan on course for technical recession, economists warn
Coronavirus impact looms as GDP shrinks at 6.3% rate after consumption tax rise

The consumption tax increase on October 1, 2019 does largely explain the fall in GDP, but it won’t cause a recession.  The coronavirus might cause a recession this year, but it obviously had no impact on 4th quarter GDP.

The fall in GDP was similar to what occurred in April 2014, the last time Japan increased its consumption tax:

Consumers buy before the tax increase and sales plunge immediately afterwards.  But this isn’t a recession in any meaningful sense of the term.  When Japan has an actually recession its unemployment rate rises significantly, as in 1998, 2001 and 2008-09.  In contrast, the sales tax increases of 2014 and 2019 were followed by a very strong labor market:

The coronavirus poses a risk to Japan because Chinese tourists had become a big source of revenue.  It might also disrupt supply lines for manufacturers.  I don’t know if Japan will have a technical recession, but I expect Japan’s unemployment rate to show only a very modest and temporary increase.  If the coronavirus problem is resolved soon, then it will probably be like 2014, a “recession” in name only.

Most recessions are caused by declines in NGDP that are expected to persist for several years.  I.e., by tight money.

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