Japan: GDP risks an uncertain outlook – UOB

Senior Economist at UOB Group Alvin Liew reviews the latest GDP figures in the Japanese economy.

Key Quotes

“Hopes for a sustained recovery into early 2021 was dashed with the resurgence of COVID19 infections in Japan. Its 1st preliminary estimate of 1Q 2021 GDP slipped back into decline as it recorded -5.1% q/q annualized rate (-1.3% q/q) after two quarters of expansion in 2H 2020. All the main engines of the economy faltered in 1Q and domestic demand fell by 1.1% q/q led by weaker private consumption spending which accounted for nearly half of the fall in headline GDP.”

“The resurgence of COVID-19 infections, and the tightening of restriction measures to contain its spread (again) continues to plague Japan, clouding its outlook as it puts private consumption on hold and a big question mark on the upcoming rescheduled Tokyo Olympic Games. A major stumbling block to Japan’s recovery could be the slow pace to its COVID19 vaccine rollout. Japan was notably late into the vaccination plan (versus the rest of G7 economies), and even as the Japanese government began its vaccinations campaign since 17 Feb but progress has been painfully slow with less than 5% of its population inoculated to date (as of 19 May).”

“We still expect Japan to resume its growth trajectory from 2Q (3.7% q/q SAAR) onwards but we have lowered the full-year GDP growth to 2.5% in 2021 (from +3.2% previously estimated), compared to the revised 4.7% contraction in 2020. Growth is thereafter expected to ease further to 2.2% in 2022.”