Japan wants to break free from the US

Japan's economy is growing vigorously - but a new set of threats threats in early 2021

By Reuters Staff

Tokyo (Reuters) - Japan's economy grew surprisingly strongly in the fourth quarter and, thanks to rising exports, is increasingly emerging from the worst recession of the post-war period.

The gross domestic product (GDP) of the third largest economy in the world rose between October and December by 3.0 percent compared to the previous quarter, according to government data on Monday. Economists had only expected plus 2.3 percent, after 5.3 percent growth in the summer. The data helped the Nikkei share index over the 30,000 mark for the first time since 1990. However, the corona pandemic threatens another setback for the economy at the beginning of 2021. "The conditions are such that Japan will not be able to avoid negative growth in the first quarter, "said expert Takumi Tsunoda of the Shinkin Central Bank Research analyst.

In 2020 as a whole, Japan's economy shrank by 4.8 percent as a result of the pandemic and thus for the first time since the recession in the financial crisis of 2009. For comparison: In the USA it was 3.5 percent down, in Germany 5.0 percent and in the euro zone by 6.8 percent. In Japan, the central bank is ready to continue supporting the domestic economy during the corona crisis. According to insiders, the monetary watchdogs are sounding out steps for their strategy check in order to assure the financial markets that their room for maneuver has not yet been exhausted. The Bank of Japan plans to announce the outcome of the review of its monetary policy instruments in March.

AFTER THE DAMPER IN THE BEGINNING OF 2021, THE UPWARD WILL NOT COME TO SPRING

At the end of 2020, the global economy generated momentum and helped Japanese exporters to do significantly better business. Private consumption also increased noticeably, albeit weaker than in the summer quarter. Back then, consumers had increased their spending noticeably after the lockdown had ended. Due to the second corona wave, however, the government in Tokyo recently tightened the state of emergency. "There is a high likelihood that the cycle of spreading and containing coronavirus infections will repeat itself this year," said analyst Tsunoda. "That means that consumption is unlikely to recover at the expected rate."

If the emergency measures are lifted in March, the Japanese economy is likely to revive between April and June, said economist Yusuke Shimoda of the Japan Research Institute. "But we can't expect much growth as it will likely take some time for vaccinations to reach the general public."