Senior Economist at UOB Group Alvin Liew assesses the latest GDP figures in the Japanese economy.
Key Quotes
“Japan staged a strong rebound in 3Q following the pandemic-ravaged trough in 2Q. Its 1st preliminary estimate of 3Q 2020 GDP recorded a significant rebound in economic activity with a growth of 5% q/q (+21.4% annualized rate) strongest since 1980. Private consumption and external demand led the recovery of GDP but continued weakness in business spending and a drawdown in inventories damped the overall recovery.”
“Expectations for a sustained economic recovery for Japan has been dampened with the resurgence of COVID-19 infections, in addition, the continued weakness in its manufacturing and services PMIs and the U-turn in its household spending recovery added to Japan’s woes. That said, the silver linings for Japan include vaccine developments, a temporary halt to worsening US-China relations, and potentially more fiscal stimulus and BOJ accommodative monetary policies.”
“Based on the significant improvement in the 3Q GDP and a milder rebound projection in 4Q, we now expect Japan’s full-year GDP to contract by 5.5% in 2020 (from -6% previously). We expect the GDP to grow at an above-potential rate of 2.8% in 2021 (down from 3.0% previously). The key risks to our outlook continue to be centred around COVID-19 developments. Downside risk is a repeat of (at least) some of the restrictive measures to contain COVID-19, and thus, reinflicting some the economic damage previously experienced in 2Q. On the other hand, the primary upside risk to the forecasts will be the successful and quick deployment of a vaccine against COVID-19.”
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