Japan’s economic growth rate is the highest in 52 years, consumption and external demand rebound-July-September-Bloomberg

Photographer: Buddhika Weerasinghe / Bloomberg

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Preliminary figures for real national total production (GDP) for the July-September 2020 period increased by 21.4% from the previous quarter, the largest increase since 1968 since 1955, including the old standard. Positive growth is the first in four quarters. In addition to the policy effect of responding to the new corona virus, the resumption of global economic activities supported the recovery. The Cabinet Office announced on the 16th.

In the July-September period, when the national emergency declaration was lifted, personal consumption, which accounts for the majority of GDP, increased significantly in response to the reaction to refraining from leaving and a series of policy responses. Exports also contributed positively to the recovery of the foreign economy. On the other hand, due to uncertainty about the future, business investment sentiment did not improve and capital investment continued to decline.

Mr. Yasutoshi Nishimura, Minister of Economic Revitalization (press conference after GDP announcement):

• After bottoming out in April and May, it was confirmed that the economy continued to recover and is making a steady comeback due to the policy effect of the primary and secondary corrections.
• The economy is below pre-crown levels, still recovering
• Attention needs to be paid to the negative risk of personal consumption due to the increase in infected people at home, and we would like to do everything possible to control the spread of infection.
• Don’t become a mindless offensive capital investment
• Assuming a GDP gap greater than 30 trillion yen, it is necessary to consider the scale of economic measures from a macro perspective.
• We must strengthen our growth potential to accelerate the economic recovery, with the prospect of returning the economy to the forefront of Corona in 2010.

Economists view

Yoshitaka Shinie, Chief Economist, Daiichi Life Institute for Economic Research:

• Driven by external demand and consumption, profitability in the July-September quarter was stronger than expected
• However, the number of infected people is increasing both in Japan and abroad, and we are not in a situation where we can be very optimistic about the future.
• There is no doubt that the growth rate will slow down in the future, it takes a considerable amount of time to return to the previous level.
• The Bank of Japan has no choice but to maintain its current easing stance.

Harumi Taguchi, Chief Economist at IHS Mark It:

• I think government policies like GoTo have worked for consumption. However, business investment was higher than expected. It does not appear to be improving even in October, and this trend may continue as corporate profits are declining and demand is not expected to recover and considerable investments are being held back.
• The employment situation remains dire as the infection rate is increasing again and some companies are abstaining from work. If the effect of the policy is cut, consumption may slow down while income is low – I can’t be optimistic yet
• The situation may continue that the economy does not recover as expected due to the re-spread of the infection until the January-March quarter.

Details (explanation from Cabinet Office)

• Private consumption is the highest since 1980, comparable to current standards
  • Eating out, entertainment services, cars, lodging, etc. make a positive contribution
• Negative capital investment for the second consecutive quarter, contributing to a decrease in spending on production machinery
• Exports increased for the first time in 3 quarters, automobiles contributed to the increase
• Imports decreased for the first time in two quarters, crude oil and natural gas contributed to the decline
• Real GDP is the highest since 1980, which can be compared with the current standard, both in quarterly and annually.

background

• In the monthly economic report for October, the Cabinet Office continued to make a general judgment that the economy “is moving to recover.” By item, personal consumption has been revised upward and exports have “recovered.”
• SeptemberExports declined 4.9% year-on-year, but the rate of decline has slowed for four consecutive months. Sales to China have risen highest since January 2018, and sales to the United States have also increased for the first time in 14 months.
• Prime Minister Yoshii Suga formulates additional economic measures for economic recovery on November 10.Instructions

(Updated with details and comments from Revitalization Minister Nishimura and economists)