Japan’s economy rebounded more strongly than expected from its record crash during the epidemic as business resumed, trade heats up and government stimulus helped drive a surge in consumer spending.
The Cabinet Office said on Monday that the GDP grew by 21.4% annually in three months due to the fastest growth since 1968. Economists had estimated an 18.9% expansion.
Japan’s largest growth region in more than half a century shows that the economy is back on a recovery path after three straight quarters of cotection, with sales tax increases before coming with the first wave of COVID-19 last year Had started
Nevertheless, the strong expansion only managed to recover a portion of the lost growth, which economists say will take years to recur. The increase in virus cases at home and abroad is likely to be huge this quarter.
The previous quarter’s rebound was driven by better trade with the US and China, a rebound for the auto industry and a surge in domestic spending as the country reopened with a five-week emergency and the government encouraged domestic travel. Weak business investment held back the overall growth momentum.
Now the speed of recovery depends largely on the path of the virus, as many countries head in winter. Japanese trade is threatened by new waves from America and Europe. At home, case numbers are also hitting new records and, although prevalence is moderate compared to other locations, officials are pointing to strict restrictions.
IHS Markit economist Harumi Taguchi said, “Government measures like the Go to Travel subsidy helped boost consumption, but what I expect is that business investment fell more than I expected.” “As the virus spreads again, companies are cutting hiring and once government measures expire, lower wages can be consumed.”
The economy worries that steam will run out last week as Prime Minister Yoshihida Suga asked for a third additional budget. The new spending would add to Japan’s mountain of debt, but is seen as a weakness from the government’s earlier cash handouts and the need for funds for the massive used job furlough program.
Non-annual GDP grew 5% from the prior quarter, with a consensus estimate of 4.4%.
Nominal GDP expanded by 5.2%. Economists predict 4.6%.
Private consumption grew 4.7% from the previous quarter, with analysts forecasting growth of 5.2%.
Business investment fell 3.4%, compared to a 2.9% drop predicted by analysts.
Net exports of goods and services were the largest contributors to last quarter’s expansion, adding 2.9 percentage points to non-annual GDP growth.