Against the backdrop of a pandemic, Japan’s gross domestic product (GDP) plummeted 4.8% in 2020, its first annual contraction since 2009. The world’s third-largest economy fell severely in the first part of 2020, especially between April and the end of the year. June (- 8.3%), entire sections of economic activity having been paralyzed during the state of emergency introduced in the spring in the face of Covid-19.
The rebound in the world’s third-largest economy, which began in the middle of the year, however, exceeded expectations in the fourth quarter (+ 3% over one quarter). The consensus of economists from the Bloomberg agency expected a rise of 2.4% over the past quarter, after a sharp recovery of 5.3% over the period from July to September.
Japanese exports drove growth at the end of the year, having further accelerated their rebound in the fourth quarter (+ 11.1% over one quarter). Japanese household consumption continued to be dynamic between October and the end of December (+ 2.2%), also contributing significantly to growth. And after two quarters of decline, non-residential business investment also started to rise at the end of the year (+ 4.5% over one quarter).
The International Monetary Fund (IMF) expects a rebound of 3.1% of Japanese GDP in 2021, while the Bank of Japan anticipates a recovery of 3.9% over the 2021-2022 fiscal year, which will start on 1er April.
A state of emergency that weakens growth
However, the renewed momentum of Japanese GDP since mid-2020 may be interrupted in the first quarter of this year, even if the outlook for 2021 as a whole remains good, according to economists. Because the government has reinstated a state of emergency since the beginning of January in several departments of the country, including those of Tokyo and its suburbs, to try to stop a strong local upsurge of the coronavirus since the end of 2020.
Although being lighter than the first state of emergency in spring 2020, this device, which is to last until March 7, risks weakening or even breaking the positive dynamic of household consumption, which already weakened in December. . Therefore, “A decline in GDP seems inevitable in the first quarter of 2021”; Naoya Oshikubo, economist at SuMi Trust, estimated at the end of last week.
However, the restrictions mainly affecting restaurants and bars, asked to close at 8 p.m., “The other sectors of the economy should continue to recover”, according to Capital Economics, which also highlights the expected positive effect of a massive new government stimulus package adopted in December.
For UBS economists, more cautious, consumption should pick up from April “If the health situation improves”, but they fear a disorderly and late rollout of the Covid-19 vaccination in Japan.
The effect of the Olympics on Japanese GDP uncertain
The Japanese authorities have only just authorized a first vaccine against the coronavirus on Sunday, that of Pfizer-BioNTech. The government plans to immediately vaccinate medical personnel treating patients infected with the coronavirus. Seniors and people with fragile health should follow from April.
The government must unveil this week its vaccination schedule for the entire population of the country (nearly 126 million inhabitants), while the Olympic Games (Olympics) in Tokyo must open in five months.
The effect of the Olympics on Japanese GDP this year is still very uncertain, as the organizers plan to decide in the spring whether the event will welcome spectators or not, and if so to what extent.
“At the level of the cost-benefit ratio, the balance will probably be negative” because spectators coming from abroad risk not being admitted to the Olympics, according to Anwita Basu, Asia head of Fitch Solutions recently interviewed by Agence France-Presse.
There is little chance of observing a hypothetical “Doping effect” of the Olympics on the morale of Japanese consumers, given their current lack of appetite for the event because of the global pandemic which may not yet be under control by this summer, according to Mme Basu. But the Japanese economy, armed with its powerful, highly exporting industry, can live without the OJ effect this year.