business

Wider COVID-19 curbs heighten double-dip recession risk in Japan

7 Comments
By Leika Kihara and Chris Gallagher

Japan is considering extending a state of emergency from the Tokyo metropolitan area to other regions as novel coronavirus cases increase but that could raise the risk of a double-dip recession for the world's third-largest economy.

Prime Minister Yoshihide Suga conceded that the measures that took effect in the capital region on Friday might also be needed in other parts of the country as infections spread.

The government has resisted calls from some experts for wider curbs beyond those imposed in Tokyo because of the economic pain they would cause.

Analysts and officials have warned that the limited, one-month state of emergency targeting Tokyo and neighboring prefectures could lead to a contraction in economic growth for the current quarter.

"There's no doubt it will affect January-March growth," Finance Minister Taro Aso told reporters, when asked about the economic impact.

Osaka, Kyoto and Hyogo prefectures plan to ask the government to impose a state of emergency.

"We'll work closely with the regions and respond as needed," Suga told reporters earlier when asked about the requests from the prefectures.

Many policymakers say the hit to growth this time will not be as severe as last year's state of emergency, which hurt retailers nationwide and forced many manufacturers to suspend production.

Robust overseas demand and the boost to growth from massive government stimulus will offset some of the pain, analysts say.

But prospects of a broader and longer state of emergency cloud the outlook for the economy, which is still emerging from a record slump in April-June last year.

"Even if the state of emergency is lifted, Japan would have to balance the need to curb new infections in resuming economic activity," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, who expects the economy to contract an annualised 3.7% this quarter.

"The economy may resume positive growth in April-June but the pace of pick-up will be moderate," he said.

Capital Economics expects lockdown measures to be extended by another month, and lead to a 1.5% quarter-on-quarter drop in consumption in January-March.

"The drop could be larger if more draconian restrictions are extended nationwide," said Capital Economics senior Japan economist Marcel Thieliant.

"Even then though, consumption should hold up better than last year simply because it is still depressed."

Suga said the government would support the economy with reserves set aside under stimulus packages already rolled out, signalling that no additional packages were forthcoming.

But the government may come under pressure for bolder action if the battle to contain the pandemic brings another recession, some analysts say.

Japan, though less seriously hit by the pandemic than many places, has been unable to rein in the virus with recorded daily infections exceeding 7,000 for the first time on Thursday. In total, it has seen 267,000 cases and nearly 3,900 deaths.

© Thomson Reuters 2021.

©2021 GPlusMedia Inc.

7 Comments
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The economy ofJapan has been in a slow steady decline since 1997, speeded up in 2008 and again 2011 by indirect incidents. The china-Us trade war, the Korea spat, the virus but most of all declining population and educational standards will keep the Japan economy on a strong downward trend.

The only thing to do ids to address the problems, not ignore and hide from them and somewhere around 2025 find a stable floor and provide high standard of living bjt is is inevitable the Japan economy will shrink in size. Hopefully that does not mean the citizens live worse. If handled well, we should all live better

7 ( +7 / -0 )

Good comment above.

Actually I believe that the seeds of Japans economic decline began in the mid 1980's, even before the height of the economic bubble.

7 ( +7 / -0 )

Why put economy over people's life ?

Population is already shrinking and suicide is raising again. Why not help citizens instead of letting large companies feast ?

Guess no one sees the obviius li'k between politicians and Dentsu like organizations.

5 ( +5 / -0 )

Osaka, Kyoto and Hyogo prefectures plan to ask the government to impose a state of emergency.

Why do other prefectures need to cause more economic pain to their citizens?

Hospitals are not overburdened nor are there mass deaths due to the virus.

-2 ( +0 / -2 )

Japan is still relevant today because there are things.

American outpost to project military, economic, political influences into Asia.

Middle person for developing nations to get easy loans from international financial and banking institutions

Special privileged access to the Western high-end supply chains (chipmaking to industrial robotics)

I think Japan will probably bet on keeping the first (American outpost), while the other two aspects are gradually losing to Japan.

2 ( +2 / -0 )

There's no doubt it will affect January-March growth," Finance Minister Taro Aso told reporters, when asked about the economic impact.

What's the point of reporters asking idiotic questions with obvious answers such as the above example...it's like asking me if since my leg is injured and I can't train , is that gonna affect my game performance? J- media has such low journalistic standards.

Why not help citizens instead of letting large companies feast ?

Guess no one sees the obviius li'k between politicians and Dentsu like organizations.

Sad thing is , so many Japanese see the link yet they vote for the same Jiminto deadwood at each election.

2 ( +2 / -0 )

Wider COVID-19 curbs heighten double-dip recession risk in Japan

And the cost of no curbs is...?

Japan's best companies are doing well by going up the value chain. The country needs to, too. Education is key to that, and so is critical thinking on an individual level.

Unless the country seeks to be ripe pickings for China, the LDP must die, and proper meritocratic democracy - warts and all - be achieved. No more fealty, press clubs, or gerontocracy.

2 ( +3 / -1 )

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