Capital Gain

Japan’s economy slumps more than expected as COVID-19 hits consumption By Reuters

Published: in FINANCE by .



© Reuters. FILE PHOTO: Pedestrians wearing protective masks, following the coronavirus disease (COVID-19) outbreak, make their way during commuting hour at a business district in Tokyo, Japan, January 7, 2021. REUTERS/Kim Kyung-Hoon

By Leika Kihara and Tetsushi Kajimoto

TOKYO (Reuters) -Japan’s economy shrank more than expected in the first quarter as the slow vaccine rollout and a resurgence in COVID-19 infections hit consumption, reinforcing expectations the country will lag major trading partners in emerging from the pandemic.

Extended state of emergency curbs are likely to keep any recovery in the current quarter modest, analysts say, adding to challenges for policymakers seeking to pull Japan out of the doldrums.

“With the medical situation still worsening and the vaccine rollout too slow, it will take until the end of the year for output to return to pre-virus levels,” said Marcel Thieliant, senior Japan economist at Capital Economics.

The world’s third-largest economy shrank an annualised 5.1% in the first quarter, more than a median market forecast for a 4.6% contraction and following an 11.6% jump in the previous quarter, government data showed on Tuesday.

The decline was mainly due to a 1.4% drop in private consumption as state of emergency curbs to combat the pandemic hit spending for clothing and dine-outs, the data showed.

But the bigger-than-expected contraction also reflected a surprise 1.4% drop in capital expenditure, which confounded market expectations for a 1.1% increase as companies scaled back spending on equipment for machinery and cars.

While exports grew 2.3% thanks to a rebound in global demand for cars and electronics, the pace of increase slowed sharply from the previous quarter’s 11.7% gain in a worrying sign for an economy still reeling from weak domestic demand.

Domestic demand knocked 1.1% point off gross domestic product (GDP), while net exports shaved off 0.2 point, the data showed.

“That domestic demand is weak shows the adverse effects from the coronavirus haven’t been shaken off at all,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“There’s no service and inbound spending currently, so it can’t be helped that there will be a reliance on foreign demand.”

Japan’s economy expanded for two straight quarters after its worst postwar slump in April-June last year due to the initial hit from the pandemic.

The export-driven recovery came to a standstill as consumption took a hit from a spike in new virus strains that forced the government to re-impose curbs just 10 weeks before the Tokyo Olympic Games.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





Source link

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *