JAKARTA (TheInsiderStories) - Japan’ real economic growth rebounded by 5.0 percent in the third quarter (3Q) of 2020 compared to previous quarter or rose 21.4 percent annualized (YoY). In the 2Q of 2020, the economy contracted 8.2 percent or up 28.8 percent from a year ago,
The growth was the greatest ever in quarterly basis in the last 52 years, which followed three consecutive quarters of decline, thanks largely to rebounds in private consumption and exports.
“We forecast Japan’ real GDP to shrink by 5.4 percent in 2020 and grow 2.2 percent in 2021,” said Harumi Taguchi, principal economist at IHS Markit in the latest report released today (11/16).
He continued, while travel campaigns and other stimulus measures continued to boost personal related services in October, the upward momentum of economic activity is likely to soften in the fourth quarter and possibly also in the first quarter of 2021. Although the government does not intend to halt its travel campaign, the recent rise in new confirmed infections could make consumers cautious.
Moreover, weak outlooks for wages could suppress private consumption once economic activity resumes, particularly when the upside from the government’ stimulus measures eases, he noted. Despite increases in export orders from China and Asian countries, external demand could weaken because of the impact of the resurgence of COVID-19 in the United States and the European Union.
In addition, the resumption of economic activity and progress in destocking will likely to lift imports of goods. Although the stronger-than-expected recovery in external demand in the third quarter has improved manufactures’ profit projections, uncertainties over COVID-19, balance sheet adjustments (for service industries in particular), and the yen’s appreciation (if it persists) could continue to weigh on capital investment.
While about JPY7 trillion ($66.95 billion) of emergency reserves remain outstanding, the government has begun considering planning for a third supplementary budget. The extra budget for the fiscal year 2020 - 2021 (ending March 2021) will probably include the extension of support for businesses to maintain employment and stimulus measures (such as travel campaigns), as well as support for medical institutions.
Prime Minister, Yoshihide Suga, suggested the budget will also cover spending in areas he hopes to promote, such as digital transformation and efforts to reduce greenhouse gas emissions, before measures under the budget plans become effective. These measures could expand the size of the supplementary budget, even though it should be smaller than the previous two stimulus packages under near-lockdown situations.
US$1: Rp14,000 JPY104.56
Written by Editorial Staff, Email: theinsiderstories@gmail.com
