Japan’s economy crawled back to growth in the second quarter of 2021 but the rebound remained weak because of a sudden rise in COVID-19 cases. Economic output expanded by 0.3 percent quarter-on- quarter following a 0.9 percentage point drop in the first quarter.
However, the economy grew 1.3 percent at an annualised rate, beating analysts’ expectations of 0.7 percent.
Meanwhile, pundits hold different opinions concerning the impact of the just-ended Tokyo Olympic games on the recent growth. Some experts are of the view that despite a slight rebound in the second quarter and a record number of gold medals for Japan, the Tokyo Olympics was unlikely to have boosted consumption since the event was held behind closed doors for two weeks from July 23.
On the other hand, others believe that preparation towards the Olympic games may have increased business and consumer confidence in the world’s fourth-largest economy which could possibly impact on growth in Q2.
Likely Impacts of the Olympic games
The data may support the later school of thought because in the second quarter, private consumption came in stronger than expected with 0.8 percent growth following a 1 percent decline in the first quarter, according to data published by the cabinet office on Monday.
Moreover, exports and business investment also contributed to the recovery in the April to June quarter, growing 2.9 percent and 1.7 percent, respectively.
Recovery in the Japanese economy from the coronavirus pandemic has been slower compared with advanced nations in the west, with its vaccination programme only recently picking up pace.
The Eurozone economy grew 2 percent from the first to the second quarter, while the US logged growth of 1.6 percent and China’s economy expanded 1.3 percent in the same period.
Economists warned earlier today, Monday, August 16, 2021 that there was a risk of contraction in the third quarter as the government considered stronger restrictions across the country’s big cities to control the spread of COVID infections.
“Downside risks are actually increasing for the July to September quarter, so it’s hard to be bullish about the outlook.
“The gap with other advanced economies expanded in the second quarter but that’s likely to remain the case in the July to September quarter as well”.
Yoshiki Shinke, Chief Economist at Dai-ichi Life Research Institute
Surging COVID-19 Cases
During the Games, the number of COVID-19 cases in Japan tripled to more than 15,000 a day, with the tally rising above 20,000 for the first time last week.
To curb the rapid spread of the Delta variant, the government was forced to extend its state of emergency in Tokyo and other areas until the end of this month.
Noting the limited number of severe cases and deaths compared with the rise in new infections, Naohiko Baba, Chief economist at Goldman Sachs, said the boost in sentiment from increased vaccination rates should materialize in the months ahead. Japan’s economy Japan’s economy
“As the effect of vaccinations becomes even more apparent, we forecast pent-up demand will emerge particularly in the fourth quarter”, Baba said, estimating real gross domestic product growth of 8.4 percent in the final three months of 2021.
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