The Japanese economy was expanding at a faster pace than initially expected in the previous quarter, ahead of the record surge in virus cases that contributed to Prime Minister Yoshihide Suga’s resignation decision.
Gross domestic product grew at an annual rate of 1.9% in the three months to June, supported by increased government spending, corporate investment and personal consumption, according to a revised report by the Cabinet Office.
Economists expected growth of 1.6% compared to the government’s initial estimate of 1.3%.
The revised figures confirm that Japan avoided a recession despite returning to a state of emergency and had more momentum before the recent wave of infection and activity restrictions. It shows the greater indomitable spirit that underlies the economy, but Suga, who couldn’t stop the surge in infectious diseases due to the loss of public support for his premiership, is ultimately more important. Proved to be.
“This was primarily a recovery from the contraction in the first quarter, and the economy has not yet recovered its losses since then,” said Yoshiki Shinie, chief economist at Daiichi Seimei Keizai Kenkyusho. “Therefore, this report does not turn the economy into a rosy one. Given the emergency, the economy is resilient and has led to an increase in infectious diseases.”
Aside from the government’s surge in spending on health care, the results were largely in line with expectations.
High spending by businesses suggests that the corporate world is already seeing growth beyond the pandemic, but consumer spending has improved significantly due to technological factors that do not speak of strong growth. Inflation rate corrections have effectively boosted spending.
Yuki Masushima, an economist at Bloomberg Economics, said, “The outlook for the quarter has been decisively weakened as emergencies have expanded and expanded in major cities as a result of the failure to control the infection.”
Looking at this quarter, the surge in Japan’s Olympic Summer Olympics could have had a significant impact on corporate and shopper spending. It’s not yet clear who will replace Suga, but economists expect the new prime minister to announce stimulus to support the recovery as he heads for the general election this fall.
“The economy is still fragile and politicians will continue to look for large spending packages before entering national elections, especially given the high risk this quarter due to the spread of the virus,” Shinke said. Stated.
When asked by Bloomberg about the potential economic package of becoming prime minister, Fumio Kishida, a candidate for prime minister, quoted a past government report that the output gap was about 30 trillion yen ($ 272 billion). ..
Suga’s replacement needs to do a better job of keeping COVID-19 under control and balancing the goals of protecting the economy and paving the way for normalization of activity through vaccination and lifting restrictions. there is.
Given that prices are falling, today’s numbers do not move the Bank of Japan’s monetary stimulus. Bank of Japan board members recently pointed out that the economic recovery has been delayed and that easing must continue.
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