WORLD Japan's economy grew 0.3 percent in Q2 despite virus surge


Japan's economy grew 0.3 percent in Q2 despite virus surge


09:27, August 16, 2021

Japan's economy grew 0.3 percent in the three months to June, slightly more than expected despite a surge in virus cases and new restrictions, data showed Monday.

A pedestrian walks past a Tokyo 2020 Olympic and Paralympic Games decoration board on the wall of the National Stadium, main venue for the games, in Tokyo on June 3, 2021. (File photo: AFP)

The growth came after a contraction in the world's third-largest economy in the previous quarter, driven by a slowdown in consumption after the government introduced stay-at-home requests as infections surged.

Economists surveyed by Bloomberg had forecast just 0.1 percent quarter-on-quarter growth.

The data released by the cabinet office also showed a slight upwards revision for the first quarter, when the economy shrank 0.9 percent, compared to a previous estimate of 1.0.

Japan recorded growth in the two quarters to December, but that came to a halt with a resurgence in coronavirus cases over winter that led to the imposition of states of emergency.

Tokyo and other regions have now spent much of the year under virus restrictions, with the vaccine rollout beginning later than other developed nations and moving more slowly.

The programme has picked up speed and around a third of Japanese are now fully vaccinated but infections are at record levels, with nationwide daily cases topping 20,000 in recent days.

The surge in cases, driven by the more contagious Delta variant, has clouded the chances for a strong and fast vaccine-driven recovery.

Analysts said there was still hope on the horizon.

"Output only edged higher in the second quarter and won't do much better this quarter as the Delta-driven fifth wave holds back consumer spending," wrote Tom Learmouth, of Capital Economics.

"But with the vaccine rollout still moving fast, a strong recovery in Q4 remains on the cards."

He noted that the 0.8 percent quarter-on-quarter rise in private consumption was stronger than expected and offset most of the fall in the previous quarter.

As throughout the pandemic though, uncertainty remains.

"With severe cases surging, the risks to our forecast that consumer spending will tread water in Q3 are currently tilted to the downside," Learmouth acknowledged.

Still, he said the solid pace of the vaccination programme now would leave Japan "well-placed" for a strong Q4 rebound.

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