Covid-19 Impact, Japanese Economy Contracts By 4.8% In 2020

Despite the Japanese economy growing in the fourth quarter of 2020, the economy could not make up the loss that it had sustained during the earlier part of the year because of the Covit-19 pandemic as the Japanese economy registered a negative growth for the entire of 2020.

In the three months between October and December, the Japanese economy grew at 3 per cent compared to the same quarter a year ago beating estimates of economists and analysts.

However on a quarter to quarter basis, the fourth quarter growth of the economy was significantly lower when compared to the third quarter growth of 5.3 per cent for the Japanese economy.

For the entire 2020, there was a 4.8 per cent contraction in the country’s economy which was the first contraction of the economy since 2009.

It was just last week that the Nikkei index of the country touched the 30,000 mark for a brief period of time – which was also a first for the economy since 1900.

In the quarter between April and June, its worst quarterly contraction since the Second World War was registered by the third largest economy of the world with the country’s domestic consumption and exports was hit severely by the global pandemic.

But in the second half of the current year, there was a rebound in both consumption and exports, which are the most important components of the economy of the country, which drove the growth in the last two quarters of 2020.

In the fourth quarter, there was a 2.2 per cent growth in private consumption in Japan which makes up more than half of the country’s economy. But that was significantly lower than the growth it had registered in the preceding third quarter at 5.1 per cent.

Japanese businesses were also able to increase their exports because of a stronger global economic growth in the third and the fourth quarters. The annualized growth of the economy was at 12.7 per cent which suggested that the country could be on track to stage a strong and rapid recovery from the pandemic induced recession. Annualized growth for a quarter is calculated on the basis of the assumption that the growth in the quarter will be maintained for the entire year.

However economists warned that the third and fourth quarter growths are still fragile and could be derailed by any further restrictions that could be implemented iof there is another wave of the Covid-19 pandemic in the country.  

Since Japan is lagging behind other western economies in vaccine distribution, therefore the economic recovery of the country could face an uphill task, believes Takumi Tsunoda, senior economist at Shinkin Central Bank Research.

“The conditions are such that Japan will not be able to avoid negative growth in the first quarter,” he said. “There is a high possibility that there will be a repeating cycle of coronavirus infections spreading and being contained this year, which means that consumption is not likely to recover at the expected pace,” he added.

(Adapted from BBC.com)



Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability

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