Japan’s pre-emergency growth could point to resilience

15 February, 2021 12:00 AM printer

TOKYO: Japan’s economy could emerge from a damaging state of emergency this quarter on a less-shaky footing if growth at the end of last year was as strong as economists estimate.

The latest consensus is for an annualized expansion of 10.1 per cent in the final three months of 2020, more than twice the size forecast in early December, buoyed by exports and a smaller-than-expected hit to consumer spending. Official gross domestic product figures are due Monday, report agencies.

While the world’s third-largest economy is taking another bruising this quarter under renewed emergency guidelines, a stronger showing at the end of 2020 would suggest that when growth eventually returns, the recovery may be sturdier than first envisaged. There are already signs of resilience. Government spending, Bank of Japan loan support and a corporate and employee culture that has traditionally put job security ahead of high wages have helped keep unemployment at just 2.9 per cent. Bankruptcies have fallen by at least 20 per cent from a year earlier in recent months.

That suggests Japan is avoiding some of the deeper scarring affecting other countries where failed businesses and lost jobs are leaving economies less prepared to bounce back.

“Japan’s GDP growth likely slowed in the fourth quarter after a sharp rebound in the third that was precipitated by the lifting of virus-containment measures. Even so, the expansion probably remained in the double-digits and appears to have been broad-based, with all the major components excluding inventories contributing to growth.”

Elsewhere, the World Trade Organization is set to finally get a new chief and central banks in Turkey, Indonesia and across Africa set rates.

Investors in the U.S. will be watching for the latest data on retail sales, industrial production and weekly jobless claims. Signs of positive momentum in the economy has spurred traders’ expectations for inflation and fueled debate over how much more aid is needed. Minutes from the last meeting the Federal Reserve’s interest-rate setting committee are also due out on Wednesday.