In the third quarter of 2020, Japan’s economy grew at a record pace, rebounding sharply from the biggest slump since the war era.
In the July-September period, the economy expanded by 21.4% year-on-year, exceeding the 18.9% gain predicted. It was also the first increase in four quarters, and comparable to the previous quarter’s plunge of 28.8% when the consumption was hit hard by the coronavirus-related lockdown measures.
The recovery was massively led by the 4.7% surge in private consumption with houses spurred spendings on cars, entertainment, and restaurants. External demand went up by 2.9% of the growth due to the rebounding overseas demand, which accelerated exports by 7.0%.
However, the country’s capital expenditure (CAPEX) slipped by 3.4% for the second quarter in a row in a sign for policymakers expecting to rejuvenate the economy with private-sector spending.
According to Economy Minister Yasutoshi Nishimura, Japan’s economy still had more than JPY30 trillion (USD287 billion) of the negative output gap, which is targeted to be filled by the new stimulus package being planned.
If Japan is to proceed without the additional stimulus, the country might stumble upon a fiscal problem in 2021 as the impact of the sizable packages earlier in 2020 fades away. Previously, Prime Minister Yoshihide Suga has ordered another package which could be sized between JPY10-30 trillion (USD95.6-186.8 billion).
The country’s central bank is also seen to extend the corporate funding plan after its March deadline. It would be decided between December and January.
Looking ahead, the country’s economy is estimated to shrink by 5.6% in the current fiscal year. Many analysts have predicted that Japan would need years to return to the levels pre-pandemic.
