Japan’s economic growth turned negative again in the third quarter of the year. While expectation of economic buoyancy was high over the Tokyo Olympic Games in July and the Paralympics in August, it seems to have been offset by the adverse side-effects of COVID-19.
According to the Japanese Cabinet Office announced Monday, the country’s GDP fall by 0.8 percent quarter-on-quarter. While Japan’s GDP recovered back to plus from -1.1 percent in the first quarter to 0.4 percent in the second quarter, it slipped back to minus in the third quarter.
Primary reason for the contraction can be found in a 1.1-percent drop in private consumption, which takes up around half of the country’s GDP. In August, the Japanese government invoked a state of emergency to cut the working hours of restaurants and dines while advising the public against going outside to curb the daily highs of coronavirus cases that hovered over 25,000 at peak. This led to a plunge of public dining and travel, dampening the private appetite for consumption.
Japan’s exports and imports fell by 2.1 percent and 2.7 percent, respectively. The cut in auto production owing to lack of semiconductors across global supply chains was attributable to the dip in exports. Facilities investment by the business circle tanked 3.8 percent, following the decreasing demand of vehicles for business use and construction equipment. The analysis found that Japan’s sluggish domestic demand put a drag on its GDP by 0.9 percentage points.
“There were some demands fore replacing home appliances and other products during the Olympic period, but effect completely vanished overwhelmed by the spread of the coronavirus,” said Jun Takeda, a senior economist at Itochu research institute, during an interview with Bloomberg News.
Economists are predicting that Japan will see a 5-percent growth in the fourth quarter. “The consumption appetite could be dampened by the rise in crude oil prices and the weakening Japanese yen,” the Japanese daily Asahi Shimbun said, suggesting Japan might struggle to restore its performance of the fourth quarter in 2019 as touted by the government.