March 29, 2023

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Japan: GDP fell again in the third quarter due to Govt-19 and deficit

According to preliminary figures released on Monday, Japan’s gross domestic product (GDP) fell sharply in the third quarter due to the epidemic and global deficit, but the worst is now over, according to economists.

According to the Japanese government, GDP contracted by 0.8% in the second quarter from July to the end of September, much worse than the Bloomberg Agency’s (-0.2%) forecast.

Japan’s economic recovery, which had already slowed to 1.1% in the first quarter, continued to stagnate again following frightening growth in the second quarter (+0.4%, up from +0, 5%, according to a revised figure on Monday).

The new contraction in the last quarter is mainly explained by the weakness in household consumption (-1.2%), while Japan experienced the worst wave of Kovit-19 this summer and the fall of non-residential private companies (-3.8%).

The government’s emergency system called on people to limit their mobility to the maximum and close pubs and restaurants in the early hours of the morning without serving alcohol, which was in effect until the end of September, reducing consumption weight. .

The Japanese industry was hit by a global shortage of semiconductors and other components: Japanese exports fell 2.1%, the first time in more than a year.

However, this decline in exports was offset by an even bigger fall in imports (-2.7%).

– Rise is expected in Q4 –

However, economists were unanimously optimistic about the resurgence in Japanese growth from the fourth quarter.

“With most local restrictions (facing Govt-19, editor’s note) now removed, we expect GDP to return to pre – epidemic levels this quarter,” Tom Learmouth said in a note to Capital Economics.

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The number of new infections in Japan fell in September and is at its lowest level ever: less than 200 new cases daily across the archipelago, according to the latest weekly average.

The national vaccination campaign has accelerated significantly since the spring of 2021. About 75% of the country’s population now receives two doses, which is one of the highest rates in developed countries.

“Therefore, the rise of epidemics in the future should not prevent consumption from resuming in the coming months,” says Lermouth in Japan.

“Strong growth is possible in October-December,” said Yoshiki Shinge, chief economist at Japanese insurance company Dai-ichi Life.

Beyond the improvement in health conditions in Japan, difficulties in supplying spare parts from Southeast Asia have led to a significant decline in Japanese automobile production in recent months.

– In recovery plan preparation –

The new Japanese Prime Minister Fumio Kishida has also made economic recovery one of his top priorities.

According to business daily Nikkei, he wants to pass an additional budget in parliament by the end of this year to fund a new recovery plan that now stands at more than 40,000 billion yen (over 300 billion euros).

ING economist Robert Cornell acknowledged in a note that the plan would “support Japanese growth” by 2022, even if all of this already included indirect assistance such as planned resources and loans.

One of the primary measures will be an individual allowance of 100,000 yen (765 euros) for all young people 18 and under in the country, except those from high-income families.

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The effectiveness of this money supply to increase home use is uncertain: by 2020, a similar measure did not prevent a drop in consumption, and the Japanese wanted to save instead.

The government plans to revive a plan to subsidize domestic tourism in Japan in early 2022, at which point the epidemic has been suspended since the end of 2020 due to a resurgence.