Japan’s economy to notch sharp recovery from corona

5 January, 2021 12:00 AM printer

TOKYO: Japan’s economy is expected to make its sharpest rebound in decades this year, with consumption set to pick up toward the end of 2021 as the impact of the coronavirus pandemic on the broader economy eases.

The world’s third largest economy is projected to grow 3.42 percent in the next fiscal year to March 2022 following a 5.37 percent shrinkage this fiscal year, according to the average forecast of 35 economists polled by the Japan Center for Economic Research, report agencies.

If the estimate is borne out, it would see a turnaround from the worst contraction to the highest growth since fiscal 1995, when comparative date became available.

The government aims to bring the economy back to pre-pandemic levels with help from stimulus measures next fiscal year. But economists said such a view seems too optimistic and that a recent resurgence of infections with new virus variants emerging could even stall the recovery in early 2021.

Consumer spending is poised to gather momentum as COVID-19 vaccines become available for widespread use by summer and would also get a one-off boost if the postponed Tokyo Olympics and Paralympics go ahead from July as currently planned.

“Japan’s economy is going to benefit from the effect of nationwide vaccination,” Atsushi Takeda, chief economist of the Itochu Research Institute, said.

Prime Minister Yoshihide Suga has promised to procure enough vaccine shots for the nation’s needs by the first half of 2021, and the government estimates 4.0 percent growth next fiscal year.

The domestic economy shrank an annualized real 29.2 percent in the April-June period from the previous quarter, possibly the largest contraction on record since 1955, according to the government.

Roughly a monthlong state of emergency declared last April brought many businesses to near standstill, with spending on trips, eating out and shopping falling sharply amid stay-at-home requests.

The economy rebounded in the following quarter with annualized 22.9 percent growth as economic activity restarted gradually. The July-September period’s real gross domestic product totaling 527.14 trillion yen ($5.1 trillion) on an annualized basis outstripped 500.63 trillion yen in the previous quarter, though it was still below 545.72 trillion yen in January-March, before the virus had a full impact on the economy.

With Japan having maintained recovery momentum into the final quarter of 2020, the Tokyo Games will likely offer an opportunity to propel spending this year, economists said.