Episode 10: The World Transformed! The Corona Shock, Economic Turmoil, and the New Normal (2020~) 🦠😷
Last time, we learned about "Abenomics," the economic policies implemented after the Great East Japan Earthquake to revive the Japanese economy, and its impact on stock prices and the economy.
This time, we'll delve into an event still fresh in our memories: the "Corona Shock," an economic crisis triggered by the unprecedented global pandemic of the "novel coronavirus (COVID-19)," and how it transformed our lives and stock prices.
The Invisible Enemy Attacks: The "Corona Shock" (2020~)
The novel coronavirus, first reported at the end of 2019, quickly spread worldwide, becoming a full-blown pandemic from early 2020. This invisible enemy not only threatened people's health and lives but also had the power to bring global economic activity to an instant halt.
Global Economic Turmoil! Lockdowns and Supply Chain Paralysis
To prevent the spread of infection, countries around the world implemented "lockdowns" of cities and strict restrictions on movement. Shops closed, factories stopped production, and schools shut down.
As the movement of people and goods was severely restricted, global "supply chains" (the flow of products from raw materials to consumers) were drastically disrupted. Flights were grounded, ports overflowed with containers, and goods failed to reach stores.
Industries like aviation, tourism, hospitality, and events were particularly devastated as customers disappeared.
Japanese Economy and Nikkei Shaken! Then, a Surprising Recovery 🎢
Japan was no exception. From February to March 2020, the Nikkei Stock Average plummeted due to the "Corona Shock." The index, which had been in the 23,000 yen range, temporarily fell to the 16,000 yen level in just about a month.
"States of Emergency" were declared multiple times in Japan, significantly curtailing daily life and economic activities. There was a period when many people refrained from going out, and city streets became deserted.
However! Stock prices then began to recover at an astonishing speed. This was largely attributed to unprecedented large-scale economic stimulus measures by governments and central banks worldwide (injecting massive amounts of money into markets, providing cash handouts) and growing expectations for vaccine development. This rapid recovery was sometimes called a "V-shaped recovery." By the end of 2020, the Nikkei Stock Average had even renewed its high for the first time in about 29 years!
But not all companies recovered equally. IT-related companies and those benefiting from increased time spent at home ("stay-at-home demand") performed very well, while the restaurant, travel, and entertainment industries continued to struggle. Some described this uneven recovery as a "K-shaped recovery."
How Did the World Respond? Unprecedented Fiscal and Monetary Measures 💰💉
Faced with this unprecedented crisis, governments and central banks worldwide acted 금액規模で経済を支えようとしました。
- Massive Fiscal Stimulus: Cash handouts were distributed to individuals, and support funds were provided to businesses affected by a decrease in work.
- Ultra-Monetary Easing: Central banks lowered interest rates to near zero and supplied large amounts of money to the market to make it easier for companies to borrow money and to support financial markets from collapsing.
- Vaccine Development and Distribution: Simultaneously, efforts to develop and distribute vaccines to curb the threat of the virus were rapidly advanced globally.
The Pandemic Changed Society and Work Styles 🏡💻
💡 The Beginning of the "New Normal" 💡
The COVID-19 pandemic significantly changed our lives and how we work. Do you remember these changes?
- Remote Work (Telework): Working from home without going to the office became commonplace for many companies.
- Shift to Online: Meetings, classes, and even social gatherings went online! Shopping online and ordering food delivery also increased dramatically.
- Acceleration of Digital Transformation (DX): Across society, the move to change systems using digital technology (DX) accelerated tremendously.
- Increased Hygiene Awareness: Wearing masks, handwashing, and disinfection became part of daily life. Maintaining "social distance" was also emphasized.
How Were Global Stock Markets? Nasdaq on a Roll?
During the Corona Shock, the U.S. "Nasdaq Composite Index," which lists many high-tech companies, continued to rise strongly, partly due to the strength of giant IT companies like GAFAM (Google, Amazon, Facebook (now Meta), Apple, Microsoft). The shift to remote work and increased online shopping provided a tailwind for these companies.
The Dow Jones Industrial Average (a leading U.S. stock index) also experienced significant volatility, and the USD/JPY exchange rate showed unstable movements, initially with a flight to the safe-haven yen (yen appreciation), followed by dollar buying on expectations of U.S. economic measures.
The Corona Shock had an immeasurable impact on the global economy and our lives, but it also served as a major catalyst for rethinking new technologies, ways of working, and the nature of society.
Now, what kind of movements will the Japanese economy and the Nikkei Stock Average show after experiencing the major storm of the pandemic? Next time, let's finally consider "Recent Nikkei Trends and What Lies Ahead"!