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Thursday, December 1, 2022

Japan’s economy is contracting, but the outlook is improving as the virus recedes

Japanese economic growth slowed in the third quarter of 2021, sliding back into contraction as the nation fought to reestablish its economic footing in the face of coronavirus restrictions and a supply chain crisis that impacted the country’s largest businesses, according to the Bank of Japan.

According to official statistics released on Monday, the country’s economy, which is the world’s third biggest after the United States and China, contracted by an annualised rate of 3% over the period July to September. The result, a 0.8 percent quarterly decline, came after a slight expansion in the previous three-month period, when economic output increased at a revised annualised rate of 1.5 percent, or a 0.4 percent quarterly rate, after a revised annualised rate of 1.5 percent in the previous three-month period.

With one of the highest vaccination rates among major countries and a viral caseload that has decreased in recent weeks to among the world’s lowest levels, Japan has abolished practically all economic restrictions and has become one of the world’s safest places to do business.

Seventy-five percent of the population has received all of the recommended vaccinations. Furthermore, coronavirus case numbers have been hovering in the low hundreds since mid-October, representing a fall of around 99 percent from their August high, signalling the return of long-suppressed consumer spending.

According to Wakaba Kobayashi, an economist at the Daiwa Institute of Research in Tokyo, the payments are expected to be more successful than earlier ones, which went directly into people’s savings accounts. “The payments are likely to be more effective than previous ones,” he added.

Even prior to the pandemic, Japan was failing to achieve economic development because to an ageing population and a decline in corporate competitiveness in the country. Because of the virus’s waves, the economy has been caught in a cycle of expansion and contraction since the second half of last year, ebbing and flowing with the virus’s waves.

While other major economies have seen a resurgence in recent months as a result of the relaxation of trade restrictions, Japan has been unable to emerge from the virus-induced quagmire that has resulted as a result of the country’s prolonged battle with the epidemic.

As the virus continued to spread, Japan was forced to declare a fresh state of emergency. People chose to remain at home rather than confront record-high case numbers, which resulted in restaurants and pubs closing early and transport being scarce.

As Furthermore, the car industry was hit hard by semiconductor shortages, which led to numerous companies cutting output dramatically in response. In September, the top eight Japanese automakers produced around half the number of vehicles they had produced at the same period the previous year.

Foot traffic, on the other hand, has practically returned to pre-epidemic levels since the country’s state of emergency was lifted last month, according to Tomohiko Kozawa, a researcher at the Japan Research Institute in Tokyo.

It is expected that Congress will pass an economic stimulus package in the coming days, which would provide cash handouts to families with children under the age of 18, financial assistance for small businesses, and measures to offset rising fuel prices, which have increased costs across a wide range of industries as a result of the Great Recession.

Despite the fact that the government should be praised for its accomplishment in combating the virus, Daisuke Karakama, chief market economist at Mizuho Bank, believes that the country must establish a strategy for what follows after this.

David Faber
I am a Business Journalist of The National Era
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