Japan's economy with strong "rebound" in summer

Japan's economic performance in the third quarter, at 5.0 percent compared to the previous quarter, has, according to preliminary figures, made a stronger-than-expected upward leap. This was chiefly due to catch-up effects in consumption following the corona low in the spring and a sharp rise in exports of goods. The expansive fiscal policy also helped. However, it has not yet been possible to return to the pre-crisis level seen at the beginning of the year, which was already weak in any case. In addition, the result for the second quarter was again revised downwards to -8.2 percent (Q/Q).

Although Japan's domestic service sector, and in particular the hotel and restaurant industry, tourism and all leisure-related sectors, continues to suffer from corona-related restrictions, private consumer spending grew by 4.7 percent (Q/Q) in the summer, compared with -8.1 percent in the spring "corona quarter". State income support for private households helped to ensure that spending on durable goods, e.g. air conditioning systems for the home, rose more significantly than expected. Expenditure on health care also rose significantly.

However, the biggest growth driver of late has been exports, which benefited from a renewed robust demand for goods from China and the USA. Demand here was particularly strong for vehicles and vehicle parts. Meanwhile, Japanese imports declined. On balance, trade in goods alone contributed almost 3 percentage points to growth, accounting for around two thirds of total economic growth in Q3.

Economic momentum is likely to flatten off significantly in the final quarter of the year. For one thing, the catch-up effects in domestic demand have probably come to an end for the time being. In addition, Japan has also recently been affected by significantly higher new infections of Covid-19. According to the WHO, almost 9,600 new cases were registered in Japan in the second week of November alone, a marked increase of over 60 percent compared to the previous week.

Whether a "second wave" such as that currently afflicting Europe and other countries can now be "caught" in Japan is becoming more questionable every day. So far, Japan has come through the corona pandemic relatively "lightly" compared to other industrialized countries. However, the latest figures are causing concern and will certainly affect economic activity there. A negative growth quarter at the end of the year can no longer be ruled out. For 2020 as a whole, we therefore continue to expect economic output to fall by almost 6 percent before a broader, albeit not too dynamic, recovery can set in next year.

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