Japan returns to GDP growth

16 Feb 22

Japan’s GDP increased by 1.7% in 2021, as the nation continued to recover from a recession exacerbated by the Covid-19 pandemic.

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Japan

Tokyo, Japan. Image ©iStock

Economic growth recorded last year, turned positive for the first time in three years, after the south east Asian country posted a 4.5% contraction in 2020.

Japan recorded GDP growth of 1.3% in the final quarter of last year, fuelled by a recovery in consumer spending, rising by 2.7% compared to the three months to September, according to figures published by the Japanese cabinet this week.

Takuto Murase, deputy senior researcher at the Japan Research Institute, said: “The economy was temporarily picking up towards the end of last year.

“Service consumption increased significantly following the cancellation of the state of emergency, and the pick-up in automobile production due to the alleviation of parts shortages also contributed to the increase in real GDP.”

The economy in the final quarter of 2021, was 5.4% higher than the same period in 2020, but economist said that output began to lose steam in December due to Covid-19.

Economists expect that growth will slow over the first quarter of 2022, after measures were adopted to slow the spread of the Omicron variant of Covid-19.

Murase said: “Currently, there are signs of a peak in the number of newly infected people, and although manufacturing production is expected to recover due to the relaxation of supply constraints, it cannot be expected to be strong enough to boost the economy significantly. 

“As a result, the real GDP growth rate for the January-March quarter is expected to slow to around 1%.”

Tom Learmouth, Japan economist at economic researcher Capital Economics, said: “While Omicron will cause Japan’s economy to do little more than tread water this quarter following a rebound in Q4, output should soon resume its recovery and get back on its pre-virus trend by the end of the year.”

Last month, economists at the International Monetary Fund said that Japan will need to raise taxes once the nation has recovered from Covid-19, to help reduce yearly deficits.

The IMF said without any new policies, the budget deficit will fall to 2% of GDP in 2024, but then “rise gradually over the long term due to age-related spending pressures” such as healthcare and pensions.

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