Japan’s Economy Rebounds – GDP Beats Forecast

The Japanese economy has posted a sharp rebound between July and September after the steep downturn in the previous quarter owing to the coronavirus pandemic driven lockdown. According to data released by the government, the economy grew by 21.4% YoY in the July-September quarter after contracting by 28.8% in the April-June quarter.

The rebound was even better than the economists’ forecast for a growth of 18.9% YoY. The QoQ GDP growth between July and September also came in better than forecast at 5% vs. 4.4% expected, effectively putting an end to the recession that Japan had experienced over the past three quarters.

The better than expected growth in the GDP came on the back of an increase in private consumption, which improved by 4.7% QoQ during the period after the end of the lockdown and emergency measures that had been imposed by the government to combat the spread of the pandemic. In addition, external demand also picked up, contributing 2.9% to GDP growth as international trade improved and exports rose by 7%.

On a worrying note, however, capital expenditure among Japanese firms fell by 3.4%, contracting for the second consecutive quarter due to the uncertainty caused by the coronavirus pandemic. So far, the government has rolled out stimulus worth $2.2 trillion to prop up the economy and is expected to announce more stimulus soon.

Despite the latest GDP growth, economists have forecast that the Japanese economy could contract by 5.6% in the current fiscal year. A return to pre-pandemic levels of growth could take several years for the world’s third largest economy.