Japan’s Gross Domestic Product (GDP) tumbled 4.8% in 2020 amid a pandemic, its first annual contraction since 2009, according to preliminary figures released by the government on Monday. The world’s third-largest economy had fallen severely during the first part of the year, especially between April and the end of June (-8.3%), whole swathes of economic activity having been paralyzed during the state of emergency instituted in spring by the government in the face of Covid-19.
The rebound in the world’s third-largest economy, which began in the middle of the year, however, exceeded expectations in the fourth quarter (+ 3% over one quarter). The consensus of economists from the Bloomberg agency expected an increase of 2.4% over the past quarter, after a sharp recovery of 5.3% over the period July-September.
Japanese exports drove growth at the end of the year, having further accelerated their rebound in the fourth quarter (+ 11.1% over one quarter). Japanese household consumption continued to be dynamic between October and the end of December (+ 2.2%), also contributing significantly to growth. And after two quarters of decline, non-residential business investment also started to increase at the end of the year (+ 4.5% over one quarter).
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A Japanese momentum that risks being interrupted by the state of emergency
However, the renewed momentum of Japanese GDP since mid-2020 may be interrupted in the first quarter of this year, even if the outlook for 2021 as a whole remains good, according to economists. Because the government has reinstated a state of emergency since the beginning of January in several departments of the country, including those of Tokyo and its suburbs, to try to stop a strong local upsurge of the coronavirus since the end of 2020.
Although being lighter than the first state of emergency in spring 2020, this device, which is to last until March 7, risks breaking the positive dynamic in household consumption.
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Therefore, “a decline in GDP seems inevitable in the first quarter of 2021” had estimated Naoya Oshikubo, economist at SuMi Trust at the end of last week. However, the restrictions mainly affecting restaurants and bars, requested to close at 8 p.m., “other sectors of the economy should continue to recover,” according to Capital Economics, which also underlines the expected positive effect of a new massive revival of the government adopted in December.
For UBS economists, more cautious, consumption should pick up from April “if the health situation improves”, but they fear a disorderly and late deployment of the vaccine against Covid-19 in Japan.
No “doping effect” of the Olympic Games expected
The effect of the Olympics (Olympics) on Japanese GDP is still very uncertain, as organizers plan to decide in the spring whether the event will welcome spectators or not, and if so to what extent.
“In terms of the cost-benefit ratio, the balance will probably be negative” because there is little chance that spectators from abroad will be admitted to the Olympics, according to Anwita Basu, head of Asia at Fitch Solutions recently interviewed by the Agency France-Presse (AFP).
There is little chance of observing a hypothetical “doping effect” of the Olympic Games on the morale of Japanese consumers, given their current lack of appetite for the event because of the global pandemic which may not yet be under control. ‘here this summer, again according to Anwita Basu. But the Japanese economy, armed with its powerful, highly exporting industry, can live without the OJ effect this year.