Japan extends economic recovery as exports, capex shake off COVID hit

Reuters | Updated: 15-02-2021 09:26 IST | Created: 15-02-2021 09:26 IST
Japan extends economic recovery as exports, capex shake off COVID hit

Japan's economy expanded more than expected in the fourth quarter, extending the recovery from its worst postwar recession thanks to a rebound in overseas demand that boosted exports and capital spending.

But the recovery slowed from the third quarter's brisk pace and new state of emergency curbs cloud the outlook, underscoring the challenge policymakers face in preventing the spread of COVID-19 without choking off a fragile recovery, especially in the battered consumer sector. "Conditions are such that Japan will not be able to avoid negative growth in the first quarter," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research.

"There is a high possibility that there will be a repeating cycle of coronavirus infections spreading and being contained this year, which means that consumption is not likely to recover at the expected pace." The world's third-largest economy grew an annualised 12.7% in October-December, government data showed on Monday, exceeding a median market forecast for a 9.5% gain.

It was slower than the revised 22.7% surge in the previous quarter, when the economy got a lift from pent-up demand after a previous state of emergency was lifted in May. For the full coronavirus-stricken year, Japan's economy contracted 4.8%, the first annual fall since 2009.

But Japan's October-December performance was stronger than U.S. growth of 4% and a 2.8% slump in the euro zone. With two straight quarters of solid growth, Japan's economy likely recouped 90% of pandemic-induced losses, analysts say. "Japan's recovery proceeded at a much faster pace than initially expected," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

"There's still some distance toward a full normalisation, but economic activity is recovering toward pre-pandemic levels." A global rebound in manufacturing activity gave exports and capital expenditure a much-needed boost as shipments to China's rapidly recovering economy heated up.

External demand, or exports minus imports, added 1.0% point to fourth-quarter GDP growth thanks to a 11.1% surge in exports. Capital expenditure also grew 4.5%, marking the first increase in three quarters, as companies proceeded with spending that had been put off last year due to the pandemic.

Private consumption, which makes up more than half of the economy, rose 2.2%, slowing from the 5.1% increase in the previous quarter but exceeding market forecasts for a 1.8% gain. The outlook, however, remains highly uncertain as Japan lags western countries in rolling out vaccines.

A resurgence in infections forced the government to terminate a controversial travel discount campaign that had supported service spending in October and November. Analysts expect the economy to contract in the current quarter, as retailers take a hit from renewed state of emergency curbs rolled out in January and set to last until early March.

"If state of emergency measures are lifted in March, Japan's economy will probably rebound in April-June," said Yusuke Shimoda, senior economist at Japan Research Institute. "But we can't count on a big expansion as it's likely to take time for vaccine shots to reach the wider population."

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)


TRENDING

OPINION / BLOG / INTERVIEW

East African women traders: 'Celebrating the past, planning for the future'

COVID-19 has hit women disproportionately hard across East Africa, especially those working in the informal sector. Lessons must be learnt to prevent this from happening again....

Viral variants and vaccine nationalism pose two-pronged threat to Covid victory

... ...

Tracking Fintech during COVID-19: Harnessing power of technology

Its abundantly clear now that as fintech cements its place in the financial sector, accelerated further by the COVID-19 pandemic, it could open the sector to new possibilities by harnessing the power of technology to deliver financial ...

Tectonic turns: How technology shaped healthcare over the decades

Tracing an episodic evolution, with technology at the interface of human and his health....

Videos

Latest News

Australia's Perth to enter snap lockdown after second COVID-19 case

Western Australias capital of Perth and the neighbouring Peel region will enter a snap three-day lockdown from midnight on Friday after two people tested positive for COVID-19, the first cases of community transmission in Australia in a wee...

Maha: Nonagenarian from Beed defeats COVID-19 twice

At a time when the COVID-19 toll in Maharashtra is witnessing an upward trend, a 90-year- old man from Beed district has beaten the deadly infection twice and is living to tell the tale.The nonagenarian has attributed his recovery to clean ...

European stocks on course for first weekly drop in eight, Allfunds jumps in debut

European stocks were on track for their first weekly loss in eight on Friday as a surge in global coronavirus cases offset optimism about a strong earnings season, while Madrid-based Allfunds jumped in its Amsterdam market debut. The pan-Eu...

Government organises bird flu awareness campaign in J-K

With several parts of Jammu and Kashmir reporting bird flu cases an awareness campaign was organised by the Department of Animal Husbandry in the Union Territory. On Friday, Chief Animal Husbandry Officer, Srinagar organised a camp in the N...

Give Feedback