A relaxation of Covid-19 restrictions prompted a boost in consumer spending and a rebound in Japan’s economy during the last three months of 2021, though the bounce was less strong than in the US.
Japan’s gross domestic product rose by an annualised 5.4 per cent during the October to December period, according to figures released by the cabinet office on Tuesday. A consensus of analysts polled by Reuters had expected 5.8 per cent.
But analysts warned that the rebound was likely to have lost steam after December, when the Omicron variant of the coronavirus began to take hold, the yen softened and rising oil prices began to weigh on a Japanese economy dependent on energy and food imports.
On a quarter-on-quarter basis, the Japanese economy posted a rebound of 1.3 per cent after a fall of 0.7 per cent in the July to September period.
Consumer spending, which makes up over half of Japan’s GDP, increased by 2.7 per cent, as restaurants, entertainment and travel sectors benefited from what were historically low rates of new Covid-19 infections.
That took it to a level higher than it was in the final three months of 2019. In the whole of 2021, the country’s economy rose 1.7 per cent, turning positive for the first time in three years.
“Omicron has since taken the wind out of the economy’s sails,” said Tom Learmouth, Japan economist at Capital Economics. “But with daily cases now falling and the booster rollout finally up to speed, fair winds should return in the second quarter.”
He added: “Assuming no new variants of concern emerge, we’re expecting a 1.5 per cent quarter-on-quarter rise in GDP in the second quarter and a further 1% rise in the third quarter to put the economy back on its pre-pandemic path.”