Japan’s economy expanded by 5 per cent in the third quarter of 2020 as the country’s rebound from Covid-19 produced its first quarter of growth in a year.
The figure exceeded consensus expectations of a 4.4 per cent rise. But in a sign of the severe damage wreaked by the pandemic, Asia’s largest advanced economy is still almost 6 per cent smaller than it was a year ago.
The partial rebound suggests a full recovery from the pandemic will prove protracted and difficult, especially if a recent rise in coronavirus cases develops into a larger wave. Japan recorded 1,722 new cases of Covid-19 on Saturday, the most recent day for which data was available, compared with 868 a fortnight earlier.
At an annualised rate, Japan’s economy grew 21.4 per cent, putting the scale of its rebound on par with that of other advanced economies. The US regained about two-thirds of its lost output in the third quarter.
Japan’s economic weakness will probably accelerate discussions on a third supplementary budget for this fiscal year. Yoshihide Suga, the prime minister, has ordered a new spending package that could amount to ¥10tn ($95.5bn).
Consumption rose by 4.7 per cent during the third quarter, fuelling the rebound, but business investment dropped by a further 3.4 per cent. The investment decline came on top of a 4.5 per cent fall in the second quarter, highlighting the bleak outlook for many businesses affected by the disease.
Japan’s economy was already struggling before Covid-19 hit, after a rise in consumption tax last autumn pushed it into recession.
With interest rates already at zero, the Bank of Japan has responded to the downturn by buying more equity funds and flooding the banking sector with cheap loans.
The main response has come from the government, which has launched various schemes, including a ¥100,000 handout for every person in the country.
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