Staff stock seafood at an Aeon supermarket in Chiba. Photo: REUTERS file
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Japan's economy rebounds by 21.4% in 3rd quarter as pandemic pain eases

28 Comments
By Leika Kihara and Tetsushi Kajimoto

Japan's economy grew at the fastest pace on record in the third quarter, rebounding sharply from its biggest postwar slump, as improved exports and consumption helped the country emerge from the damage caused by the coronavirus pandemic.

However, analysts painted the sharp bounce back as a one-off from the depths of recession, and cautioned that any further rebound in the economy will be moderate as 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 available in 1980 and followed a 28.8% plunge in the second quarter, when consumption took a hit from lock-down measures to prevent the spread of the virus.

"The strong growth in July-September was likely a one-off rebound from an extraordinary contraction caused by the lock-down steps," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

"The economy may not fall off a cliff. But given uncertainty over the outlook, I would err on the side of caution in terms of the pace of any recovery," he said.

The rebound was driven largely by a record 4.7% surge in private consumption, as households boosted spending on cars, leisure and restaurants, a government official told a briefing.

External demand also added 2.9 percentage points to gross domestic product (GDP) growth thanks to a rebound in overseas demand that pushed up exports by 7.0%, the data showed.

But capital expenditure fell 3.4%, shrinking for a second straight quarter in a worrying sign for policymakers hoping to revitalise the economy with private-sector spending.

Economy Minister Yasutoshi Nishimura said the economy still had over 30 trillion yen ($287 billion) of negative output gap, or spare capacity, part of which must be filled by a new stimulus package now in the works.

"We can't make up for all of the output gap just with public works spending. We also need to spur private investment. But the size (of the output gap) is something we'll look at" in compiling the new spending package, he told a news conference.

A negative output gap occurs when actual output is less than the economy's full capacity and is see as a sign of weak demand.

Without additional stimulus, Japan may experience a fiscal cliff next year as the effect of two big packages deployed earlier this year - worth a combined $2.2 trillion - peter out.

Prime Minister Yoshihide Suga has instructed his cabinet to come up with another package, which analysts say could be sized anywhere between 10-30 trillion yen.

"Nishimura's remark on the 30-trillion-yen output gap suggests the size of the new package would come by as much," said Takeshi Minami, chief economist at Norinchukin Research Institute.

The Bank of Japan is also expected to extend its corporate funding program beyond its March deadline, with a decision expected next month or January, analysts say.

Despite some signs of improvement in recent months, analysts expect the world's third-largest economy to shrink 5.6% in the current fiscal year ending in March 2021 and say it could take years to return to pre-COVID levels.

© Thomson Reuters 2020.

©2020 GPlusMedia Inc.

28 Comments
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Oh please , save us from propaganda.

nobody except the politicians and bureaucrats are helped by these distorted sunny reports

16 ( +27 / -11 )

Japan's economy grew an annualised 21.4% in the third quarter

A 12-month statement based upon three-month period of performance. I wonder how could anything go wrong with that strategic assessment?

13 ( +20 / -7 )

This is what is known as the "Dead Cat Bounce." Drop a dead cat from the top of a tall enough building and it will rebound. That doesn't mean it's come back to life.

This will be a double-dip recession as the 2nd and 3rd waves hit global demand.

0 ( +17 / -17 )

LOL, at the negative comments. Japan beat the virus and the economy is growing again. Enough said.

-20 ( +11 / -31 )

I'm only one point on a huge graph, but most of my work is planned in advance. I won't know the full situation until 2021 or 2022.

Covid-19 has had a limited impact in Japan so far, which is definitely a "good". In some countries, government response appears key to how the virus situation has developed, but in Japan, the government almost seems to be an irrelevance.

1 ( +10 / -9 )

Covid-19 has had a limited impact in Japan so far, which is definitely a "good". In some countries, government response appears key to how the virus situation has developed, but in Japan, the government almost seems to be an irrelevance.

How is the gov't here irrelevant ? One doesn't need to be an economist to know that the rosy numbers stated here is because of the gov't funded GOTOs.

-8 ( +4 / -12 )

robert maes - if consumer spending goes up on things like restaurants, domestic travel, and many other goods ands services surely those business owners who were basically on the brink of bankruptcy also benefit, employees are retained?? fascinating understanding of economics you have ...

-13 ( +2 / -15 )

Japanese are resilient and have been through so many crises. I'm happy to be here and even though there will be more hurdles down the road I feel pretty confident this country will be in a better place 6 months to a year from now. 10 years from now that's another debate but short term, I like the odds here and my family are I are happy to stay.

-8 ( +7 / -15 )

The Japanese people are not getting richer than in past decades but poorer.

I do a simple observational test which reflects the economic confidence of the Japanese consumer.

I’m in Kyoto looking at the the shoes of the passengers on the train.

The vast majority are low quality and low price.

Unscientific?

Of course.

However, Kyoto has been hit hard by the economic downturn and the massive drop in tourism.- it is reflected in the shoes....

26 ( +26 / -0 )

thanks again for the propaganda. Print the money !!!!

5 ( +8 / -3 )

Even Italy in the last semester got a big economical boom according to the numbers.

But numbers as always need to be interpreted and divide the real economy with the one exclusively of the stock markets or big company.

4 ( +9 / -5 )

LOL, at the negative comments. Japan beat the virus and the economy is growing again.

Beat the virus?...Thanks for the laugh , that must be why record daily numbers are reported even with Japan,s ridiculously low third world testing ....

GDP growth - its basically the same as US 33% quarterly GDP increase....coming off the back bottom inducing lockdown quarter and resulting overseas demand surge once lockdowns were lifted worldwide.....not really rocket science. Just as it will not be rocket science the numbers will plunge with the new round of lockdowns in Europe and elsewhere.

6 ( +10 / -4 )

nihonview:

Japan beat the virus

On what planet?

12 ( +13 / -1 )

I can agree with Marcelito,the GDP is basically always growing,even at a minimum,and again it doesn’t relflect the real social state of the population.

Without a good welfare there is no balance.

Besides I feel amused that some people that” always try to speak with wisdom” and little heart try always to show his mental frustration in this forum.

0 ( +4 / -4 )

3 quarters tend to be very active for most in the northern hemisphere. Summer is an active time and many people were looking for an escape during that time. However, in this virus stricken time, that 3rd quarter is more of an outlier than a sign of things to come. Many countries rebounded in the 3rd quarter because of the time.

1 ( +3 / -2 )

I wish this was true. Reality is different.

1 ( +2 / -1 )

LOL, at the negative comments. Japan beat the virus and the economy is growing again. Enough said.

Maybe you should read the full article:

However, analysts painted the sharp bounce back as a one-off from the depths of recession, and cautioned that any further rebound in the economy will be moderate as a resurgence in infections at home and abroad clouds the outlook.

9 ( +10 / -1 )

LOL, at the negative comments. Japan beat the virus and the economy is growing again. Enough said.

Beating up the virus. Sorry, not real.

https://www.japantimes.co.jp/news/2020/11/13/national/social-issues/japans-next-novel-coronavirus-wave/

Secondly, the economy is far from growing as it still fails to meet the inflation target of 2%.

Oh please , save us from propaganda.

nobody except the politicians and bureaucrats are helped by these distorted sunny reports

Labor statistics have always been the crown jewel of Japanese data manipulation. Recently, things got so bad that they can't hide the fact: Japanese employment rate is falling as well as less graduates get accepted into favorable positions. Even the jobs prospect in the US are much better than Japan, currently.

https://www.japantimes.co.jp/news/2020/10/02/business/economy-business/japan-jobless-rate-up-august/

robert maes - if consumer spending goes up on things like restaurants, domestic travel, and many other goods ands services surely those business owners who were basically on the brink of bankruptcy also benefit, employees are retained?? fascinating understanding of economics you have ...

Government subsidies. However, they are just temporary solutions.

Japanese people are spending less ever year than Chinese and Southeast Asians. People get rich through accumulating the dollars and gold, individually. Nobody is going to accept the Yen outside of Japan. Even if the consumer spending goes up, the revenues and profits aren't high enough. Far from helping Japanese economy goes up.

The Japanese people are not getting richer than in past decades but poorer.

Definitely, true. In the next decade, Japan will drift back into a developing economy if it does not conduct necessary reforms for the people.

China and Vietnam are eating Japanese lunches, and the LDP cronies do not give a damn. What's saddened me more that most of Japanese population are still ignorant of the outside world and think Japan is still in the Golden Era. The guy like nihonview is a prime example of such.

However, Kyoto has been hit hard by the economic downturn and the massive drop in tourism.- it is reflected in the shoes....

Just look at the Japanese elites or wealthy class. They aren't even doing well.

Kei Komuro and Princess Mako fiasco, as an example. Komuro family is among the most prestigous families in Japan, and they are afford to send Kei Komuro attending the Gakushuin and top universities of Japan. When Kei entered Fordham University, his family struggles to pay the tuitions as an international student. Folks in China and Vietnam aren't the top elites of their nations, mostly SME owners that I met, can easily afford sending their kids to the US with no problem. Yes, people often use the excuse of Komuro family suffering hardship after Kei's father suicided, but they live in the top eschelon of Japanese society and still possess tons of wealth, in Japan, of course.

Every Japanese individual of wealth that I met for my company's business expressed their requests of trying to get their wealth out of Japan. They want to get all of it out of Japan! Tadashi Yanai has been warning the silent capital flight out of Japan for a decade now. He recently announced his decisions of making Fast Retailing more of an international company than a Japanese company.

Rich people of Japan are trying to get out, while poor folks stay behind to get struggled.

3 ( +13 / -10 )

My view is that Covid-19 was ripe to spread in a highly densely populated country like Japan. In relative terms though, that has not happened. In some countries, governments have enforced very strict lockdown measures. The Japanese government does not have those powers, even if it wanted to and was organized/competent enough to use them.

Hence, "In some countries, government response appears key to how the virus situation has developed, but in Japan, the government almost seems to be an irrelevance." Yes, there have been high profile things like Abenomasks, 100,000 yen each and GoTo, but they are all small beans compared to the massive interventions other governments have made. Japan already runs on money printing, so a little bit more is no big deal.

So in my view, Australia (example) is doing better (fewer deaths, less disruption) than the USA (example) = praise Australian government.

Japan is doing better than the USA = yes (and hurray!), but very little to do with the Japanese government. If you want to praise something, praise Japanese society.

-12 ( +1 / -13 )

To Nihonview, Vinny and lesser extend Roblib,

We, here on this forum, we are critical, because we care. We care about Japan, its people and the society and we want to contribute. We do not do that by hiding our head in the sand but by expressing our views AND participating and contributing practically, every day. 

As for the comment on restaurants and hotels doing better :  here some numbers. 

Skylark is closing 200 restaurants ( opening 80 ) Royal host closing 70, Yoshinoya closing 150, Colowide closing 200 and Watari closing 65. All because business is great. 

To make things better, you have to face problems. Not hide them. Ignore them.  Hotels are at 50 % capacity at best and that is only due to government support. I agree with that, but there is no substantial rebound in that. It is a necessary artificial aid, compare it with the breathing machines for covid 19 patients. Life support. 

Japan is at the beginning of a painful period, not at the end. We have to acknowledge that, rally, limit the damage, and reconstruct.  With emphasis and quality of life, not size of the economy which will inevitably be smaller. Demographics can not be ignored, nor can a loss of 30 million tourists. Ignoring is at our peril.

There is no need to hide, Japan has more than enough real strengths to build on, but holly drumbeating is not going to do it.

-1 ( +9 / -10 )

oh i can see so many crying babies grumbling about Japan economy rebound, jealousy will keep blinding people logical thinking. Maybe they can start with the Step 1, wear a mask. it is as simple as 1+1 =2, my three years old can do the exactly same calculation

-11 ( +2 / -13 )

@Robert maes

Skylark is closing 200 restaurants ( opening 80 ) Royal host closing 70, Yoshinoya closing 150, Colowide closing 200 and Watari closing 65. All because business is great. 

That is a good point.

Many posters here always complain about all the full packed restaurants. Always fully packed!

If the restaurants are ALWAYS full packed, why are they going into bancruptcy?

The thing is that the people only see the "moment-view". To compare the current amount of guests at the so called "full packed restaurants", is much more less than probably 80% than before the pandemic.

Tokyo has 14.000.000 inhabitants.

Before the pandemic, maybe all 14.000.000 went to restaurants, but now maybe only 20%.

-12 ( +0 / -12 )

@robert maes - imagine if people weren't out spending money or the government not providing stimulus and those figures were in the negative? I guess all those restaurant and hotel chains would be bankrupt.

surely that's not ideal. would you suggest the government not provide the economy with stimulus and encourage consumer spending with all the knock on effects from that? E.g Hotel chain goes bankrupt, employees lose jobs, can't pay mortgage, can't feed their kids get on government welfare costs the government and society a lot more in long run.

Please provide me with an example of a government which hasn't provided economic stimulus during COVID - and how that economy is going

-12 ( +0 / -12 )

i suggest put notice like twitter does abt POTUS posts...since this ia just pure propaganda as reality is completely different just open your eyes and look around you...

10 ( +10 / -0 )

@mate j: how is this propaganda? They are just saying how economic output grew in the 3rd quarter - based on widely available and transparent trade data both external and domestic. and they expect it to contract again when the stimulus packages dries up. Which is why Suga has suggested another stimulus package. i don't think the article is saying Japan's economy is booming - merely that it grew by 24% in the 3rd Qtr

-11 ( +0 / -11 )

Rather than central government bureacracy borrowing and spending money it doesn't have, if you're going to run up 30 trillion in debt why not just declare an income tax holiday, and let people spend their money as best they see fit, under the circumstances?

These dopey GoTo campaigns are just paying people who are happy to risk themselves to the virus other people's money for doing so.

Leave our money with us and let us decide what to do with it, if you want the private sector to play a bigger role.

1 ( +1 / -0 )

would you suggest the government not provide the economy with stimulus and encourage consumer spending with all the knock on effects from that? E.g Hotel chain goes bankrupt, employees lose jobs,

The problem is, coronavirus has not gone away, and we don't know when it will. Even now there is a cloud over the summer Olympics next year.

How long should government continue to prop up various sectors of the economy? Will it be politically feasible to stop propping them up, after they have become accustomed to the special treatment?

In all of this, there are parts of the economy that have done well out of coronavirus. What the economy looks like when all is said and done, will surely be somewhat different from the way it looked before we went in.

0 ( +0 / -0 )

Pandemic pain eases and new cases soar. Unusual!

1 ( +1 / -0 )

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