JAPAN’S economy rebounded to grow 1.3% quarter-on-quarter in the three months to December, driven by higher demand after emergency virus restrictions were lifted, data showed today.

The third-quarter growth for the world’s third-largest economy was slightly lower than market expectations of 1.5%, and followed a revised 0.7% contraction in the previous quarter.

Data released by Japan’s cabinet office also showed the economy grew 1.7% in real terms in 2021, the first annual expansion for the economy in three years.

After a spike in virus cases in the summer of 2021, when Japan hosted the Olympics with virtually no spectators, the government lifted a virus state of emergency in October, spurring private consumption, which expanded 2.7%, quarter-on-quarter.

But last month, Japan brought back coronavirus restrictions on a large part of the country, including Tokyo, as it battles record infections fuelled by the Omicron variant.

The restrictions, which mainly target nightlife and are far less strict than a blanket lockdown, will be in place until early March.

Japan is facing “more damage than expected from the Omicron variant,” said Masamichi Adachi, UBS Securities chief economist for Japan.

“Self-restraint by consumers has been greater than expected and the pace of booster vaccinations is very slow.” he said ahead of the release of the latest data. 

“While the damage from the Omicron appears to be less severe than feared for global economy, Japan may be an exception,” Adachi told AFP.

“Still, we are expecting that the Japanese economy will resume a solid recovery this year after disappointing stagnation in 2021,” he said, adding “the timing of the rebound is just delayed.”  – AFP, February 15, 2022.