Japan’s economic recovery from pandemic likely came to a halt in Q4

TOKYO (Reuters) – Japan’s economic growth likely moderated in October-December after rebounding from its worst post-war recession earlier in 2020, a Reuters poll showed, a sign that households and businesses have yet to recover from the huge success of the coronavirus pandemic.

The state of emergency put in place in January has inflicted further suffering on consumption, fueling fears of a new economic crisis that could push Japan back into deflation.

Analysts polled by Reuters expect the economy to have posted quarterly growth of 2.3% in October-December, with improved exports partly offsetting weak consumption.

However, that would be much slower than a 5.3% jump in the third quarter, when the lifting of the previous state of emergency helped the economy emerge from its worst postwar crisis in the past. quarter from April to June.

“Consumption, especially spending on services, will continue to decline as restrictions apply to economic activity,” said Masato Koike, an economist at the Dai-ichi Life Research Institute.

“A drop in consumption from January to March is inevitable.”

Highlighting the heavy toll the pandemic has taken on the fragile economy, central bank estimates in January show that the economy likely contracted 5.6% in the year ending March.

Japan’s gross domestic product (GDP) data from October to December, scheduled for release at 8:50 a.m. on February 15 (11:50 p.m. GMT, February 14), will likely highlight the challenges policymakers face. to support the economy while preventing the spread of the virus.

On an annualized basis, the economy likely grew 9.5% in October-December after gaining 22.9% in the previous quarter, according to the poll.

Chart – Japanese economy expected to grow in Q4:

(For an interactive graph of Japan’s quarter-over-quarter GDP growth, click: tmsnrt.rs/2MZu5Sl)

Even if the economy rebounds at the estimated pace in the last quarter of last year, it will remain around 80% of the level before the March pandemic, analysts say.

Private consumption, which makes up more than half of the economy, likely only grew by 1.8% in October-December after rising 5.1% in the previous quarter, according to the poll.

Capital spending is expected to have risen 2.6%, which would be the first increase since January-March last year.

External demand – or exports minus imports – likely contributed 1.0 percentage point to GDP growth from October to December, according to the poll.

“Strong overseas demand supported exports, while domestic demand was boosted by government stimulus measures,” said Shinichiro Kobayashi, senior economist at Mitsubishi UFJ Research and Consulting. “But the outlook remains uncertain.”