Japan exits recession as GDP grows five per cent in 3Q
TOKYO: Japan’s economy exited recession in the third quarter, growing a better-than-expected five per cent, government data showed yesterday, following a record contraction.
A rise in domestic demand as well as exports helped drive the quarter-on-quarter growth, after the Covid-19 pandemic and a consumption tax hike slammed the economy into reverse earlier in the year.
The positive figures come after three quarters of contraction in the world’s third-largest economy, with revised data showing the economy shrank 8.2 per cent in 2Q, more than the previously estimated 7.9 per cent. That was the worst figure for Japan since comparable data became available in 1980, exceeding even the brutal impact of the 2008 global financial crisis.
The 3Q growth will be welcome news for Japan’s government, which has avoided the tough lockdown measures seen in some other countries as it tries to balance preventing the spread
of Covid-19 with protecting the economy. The results also beat economist expectations of 4.4 per cent growth, and analysts said the recovery was likely to continue into the final quarter of the year.
“Between July and September,
economic activity in Japan experienced a return to a somewhat normal status as the government lifted the state of emergency in the country,” said Naoya Oshikubo, senior economist at Sumitomo Mitsui
Trust.
“Looking ahead, we believe that GDP figures in the next quarter should continue to show signs of recovery, albeit at a slower pace,” Oshikubo said in a note before the official release of the data. “Pent-up demand should decelerate, mainly due to second waves of Covid-19 overseas.”
Japan was already struggling with a stagnating economy and the impact of a consumption tax hike implemented last year before the pandemic hit. It has seen a smaller Covid-19 outbreak compared to some of the worsthit countries, with infections approaching 120,000 and deaths at slightly under 2,000.
But Prime Minister Yoshihide Suga last week issued a warning over a recent rise in infections, though he said the government’s campaign to promote domestic tourism would not be halted for now.
Japan imposed a nationwide state of emergency in April as cases spiked, but restrictions were significantly looser than in many countries, with no enforcement mechanism to shutter businesses or keep people at home.
The emergency was lifted in June, and the government has been reluctant to reintroduce curbs.