Covid has dealt a blow to the Japanese economy that exceeded expectations


Japan’s economy shrank much more than expected in the three months to September, as a surge in the number of COVID-19 infections weighed on spending while supply chain disruptions hit businesses, data showed Monday.
The world’s third largest economy contracted by 0.8 percent on a quarterly basis, much worse than the 0.2 percent that experts had expected.
The contraction was mainly driven by a 1.2 percent decline in household consumption that followed the imposition of the epidemic emergency during the summer, when Japan experienced the worst epidemic wave.
It was also severely affected by the decline in non-residential investment, which fell by 3.8 percent, due to the lack of electronic chips and supply chain problems that affected factory production.
Exports, another major driver of the Japanese economy, declined, with auto exports halting due to a shortage of semiconductor components, although imports of goods and services also declined, making net trade positive overall for GDP growth.
The data released by the government office included a revision of the number recorded in the second quarter of the year to June, to a growth of 0.4 percent.
The virus broke out in Japan during the summer after the slow start of the country’s vaccination campaign, while the government imposed a state of emergency that limited restaurant hours.
The Olympics went ahead during that period, despite calls to cancel it, but with fans banned from attending.
Analysts say the slowdown is likely to be short as the vaccination campaign picks up pace and the government lifted restrictions to contain the epidemic in October.
“For the fourth quarter, if infections remain low, consumption will likely recover strongly,” said Takashi Miwa, an economist at Nomura Securities.
But he warned that “some companies say the impact on production from supply problems may continue into December.”
New Prime Minister Fumio Kishida has pledged to support economic growth after being hit by the virus.
He is expected to announce a plan to stimulate the economy worth hundreds of billions of dollars this week, while his government pledged to provide booster doses of vaccines as soon as next month.


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