Japan’s economy surged at a 22.9% annualized rate in the third quarter though some economists fear the recovery from the coronavirus pandemic is threatened by rising infections.
The third-quarter gain, which was revised upward from the preliminary estimate of 21.4% on firmer consumer spending, was the largest since comparable data became available in the second quarter of 1980, according to the Cabinet Office.
The economy had shrunk 29.2% in the April-June 2020 period, possibly the worst contraction on record since 1955, amid the initial impact of the pandemic. On a quarter-to-quarter basis, output is still 3.9% below the pre-pandemic level of the last quarter of 2019.
“The sizable upward revision to Q3 GDP and the sharp rise in ‘core’ household spending in October support our view that Japan’s economy will recover from the pandemic faster than the consensus expects,” Tom Learmouth of Capital Economics said in a commentary.
“We think GDP will rise by another 2.1% (quarter-to-quarter) in this quarter and surprise to the upside next year,” he said.
As the Associated Press reports, “The expansion in the July-September quarter coincided with a push to encourage domestic spending to make up for the loss of foreign tourism with ‘Go to Travel’ and ‘Go to Eat’ programs offering steep discounts on hotels and dining out.”
A separate government report showed Tuesday that Japan’s household spending rose 1.9% in October from a year earlier, the first increase in 13 months.
But according to the Japan Times, the recent resurgence of Covid-19 infections “is clouding the outlook, keeping policymakers under pressure to support a fragile recovery with massive monetary and fiscal stimulus measures.”
“Japan’s economy will keep growing in the current quarter but may stagnate or contract in January-March,” if an increase in infections force the government to take stronger steps to contain the virus, said Takeshi Minami, chief economist at Norinchukin Research Institute.
Prime Minister Yoshihide Suga announced an additional stimulus package worth about $700 billion on Tuesday that followed $2.2 trillion in earlier measures.