Japan's market rebounds by 21.4% in 3rd quarter as pandemic pain eases
17 November, 2020
Japan's economy grew in the most effective pace on record in the third quarter, rebounding sharply from its biggest postwar slump, seeing that improved exports and usage helped the united states emerge from the damage caused by the coronavirus pandemic.
On the other hand, analysts painted the sharp bounce back as a one-away from the depths of recession, and cautioned that any more rebound in the economy will be moderate simply because a resurgence in infections at home and abroad clouds the outlook.
The world's third-largest economy expanded an annualised 21.4% in July-September, beating a median market forecast for an 18.9% gain and marking the first increase in four quarters, government data showed on Monday.
It was the biggest increase since comparable data became obtainable in 1980 and followed a good 28.8% plunge in the second quarter, when consumption took a hit from lock-down measures to avoid the pass on of the virus.
"The strong growth in July-September was very likely a one-off rebound from an extraordinary contraction due to the lock-down steps," said Yoshiki Shinke, chief economist at Dai-ichi Life Exploration Institute.
"The economy may not fall off a cliff. But presented uncertainty over the outlook, I would err on the side of caution regarding the tempo of any recovery," he said.
The rebound was driven largely by a record 4.7% surge in individual intake, as households boosted shelling out for cars, leisure and restaurants, a government official told a briefing.
Exterior demand also added 2.9 percentage tips to gross domestic item (GDP) growth because of a rebound in overseas require that pushed up exports by 7.0%, the info showed.
But capital expenditure fell 3.4%, shrinking for another straight one fourth in a worrying indication for policymakers wishing to revitalise the economy with private-sector spending.
Market Minister Yasutoshi Nishimura said the market still had over 30 trillion yen ($287 billion) of negative productivity gap, or spare ability, part of which should be filled by a fresh stimulus package now found in the works.
"We can't replace each of the output gap merely with public performs spending. We also have to spur private investment. However the size (of the productivity gap) is normally something we'll look at" in compiling the brand new spending package, he informed a news conference.
A negative productivity gap occurs when actual productivity is significantly less than the economy's full potential and is see as a sign of weak demand.
Without additional stimulus, Japan may well knowledge a fiscal cliff next year as the effect of two big packages deployed earlier this season - worth a combined $2.2 trillion - peter out.
Prime Minister Yoshihide Suga has instructed his cabinet to come up with another bundle, which analysts say could possibly be sized ranging from 10-30 trillion yen.
"Nishimura's remark on the 30-trillion-yen productivity gap suggests the size of the new package would come by as much," explained Takeshi Minami, chief economist at Norinchukin Exploration Institute.
The Bank of Japan can be likely to extend its corporate funding program beyond its March deadline, with a decision expected the following month or January, analysts say.
Despite most signs of improvement lately, analysts anticipate the world's third-largest economy to shrink 5.6% in today's fiscal year closing in March 2021 and say it could take years to return to pre-COVID levels.
Source: japantoday.com
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