Japan's economy contracts on shrinking consumption, exports

Japan’s economy shrank at a 3% annual rate in the July-September quarter, as private consumption and auto production took a hit from the ongoing efforts to curb the coronavirus pandemic

Via AP news wire
Monday 15 November 2021 01:24

Japan’s economy shrank at a 3% annual rate in the July-September quarter, as private consumption and auto production took a hit from efforts to curb the coronavirus pandemic.

Japan s gross domestic product, which measures the value of a nation’s products and services, declined 0.8% from the previous quarter, the Cabinet Office said Monday.

The annualized rate is how much the economy would have grown or contracted had the one-quarter rate continued for a year.

The world’s third largest economy grew 0.4% in April-June and shrank 1.1% in January-March.

Japan has never had a coronavirus lockdown. But it has periodically asked businesses to close or limit hours under “states of emergency.” It has also encouraged social distancing.

That has crimped consumption and private investment. Private consumption sank 1.1% in July-September from the previous quarter, according to Monday’s data.

A shortage of computer chips and other parts necessary for vehicle production has been a serious problem for months because of lockdowns in Asian nations that produce them.

Japanese automakers’ production and sales have suffered. But once the situation in Southeast Asia eases, production is expected to rebound in the months ahead. Toyota Motor Corp., Japan’s largest automaker, said recently that production is likely to return to normal next month.

The preliminary and seasonally adjusted real GDP data also showed exports sank 2.1% in the July-September period from the previous quarter.

The government has been attempting to keep infections down while keeping the economy going.

Newly elected Prime Minister Fumio Kishida has promised to expand hospital capacity for coronavirus patients and provide financial handouts. His predecessor fell out of favor with the public because of a widespread perception that his government was not doing enough to battle the virus.

About 76% of Japan's population is fully vaccinated, but worries are growing about a possible new wave of infections. Japan has not announced concrete plans for booster shots. Japan has reported about 18,000 COVID-19-related deaths.

Naoya Oshikubo, senior economist at SuMi TRUST, said an economic recovery will come once the coronavirus is brought under control. The entertainment sector and restaurants have been especially hard hit, he said.

“The stars are now aligned for a rapid recovery. The state of emergency was lifted at the end of September, so a sharp rebound in consumer spending, with more people eating out and going to cinemas, clubs, theater and other forms of public entertainment, is underway,” Oshikubo said in a recent report.

Hopes are also high that Kishida's government will pass a supplementary budget within the year to prop up the economy, he said.

Some analysts forecast Japan’s GDP will grow in the October-December quarter.

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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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