Japan’s economy is shrinking due to shrinking consumption and exports
Tokyo Japan’s economy shrank at a 3% annual rate in the July-September quarter, as private consumption and auto production were hit by efforts to curb the coronavirus pandemic.
On Monday, the Cabinet Office said Japan’s gross domestic product, which measures the value of a country’s products and services, fell 0.8% from the previous quarter.
The annual rate is the amount of economic growth or contraction if the rate of the quarter continued for a year.
The world’s third largest economy grew 0.4% in April and June and contracted 1.1% in January and March.
Japan has never been locked down due to the coronavirus. But it has periodically asked companies to close or limit business hours under “emergency situations”. It also encouraged social distancing.
This has reduced private consumption and investment. Private consumption declined 1.1% in the July-September period from the previous quarter, according to data on Monday.
Shortages of computer chips and other parts needed to produce cars have been a serious problem for several months due to the shutdowns in the Asian countries that produce them.
The production and sales of Japanese automakers have suffered. But once the situation in Southeast Asia calms down, production is expected to rebound in the coming months. Toyota Motor Co., Japan’s largest automaker, said recently that production is likely to return to normal next month.
Preliminary, seasonally adjusted real GDP data also showed that exports fell 2.1% in the July-September period compared to the previous quarter.
The government is trying to keep infections low while keeping the economy running.
Newly elected Prime Minister Fumio Kishida has promised to expand hospital capacity for coronavirus patients and provide financial aid. His predecessor was not popular with the public due to the prevailing perception that his government is not doing enough to fight the virus.
About 76% of Japan’s population has been fully vaccinated, but concerns are growing about a possible new wave of infections. Japan has not announced concrete plans for booster shots. Japan has reported about 18,000 deaths linked to COVID-19.
Naoya Oshikubo, chief economist at SuMi TRUST, said economic recovery will come once the coronavirus is under control. He said the entertainment and restaurant sector was particularly hard hit.
“The stars are now lined up for a quick recovery. The state of emergency was lifted at the end of September, so there is a sharp rebound in consumer spending, with more and more people eating out and going to movie theaters, clubs, theater and other forms of public entertainment,” Oshikubo said in a recent report. .
He said hopes are also high that the Kishida government will approve a supplementary budget during the year to support the economy.
Some analysts expect Japan’s GDP to grow in the first quarter from October to December.
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