Japan’s economy grew 5 percent in the third quarter of 2020 as the country’s recovery from Covid-19 produced its first quarter of growth in a year.
The number exceeded consensus expectations of 4.4 percent. As a sign of the severe damage the pandemic has wreaked, Asia’s largest advanced economy is still nearly 6 percent smaller than it was a year ago.
The partial rebound suggests that a full recovery from the pandemic will prove lengthy and difficult, especially as a recent surge in coronavirus cases turns into a bigger wave. Japan recorded 1,722 new cases of Covid-19 on Saturday, the last day data was available, compared to 868 two weeks earlier.
On an annualized basis, the Japanese economy grew 21.4 percent, putting the extent of its recovery on a par with that of other advanced economies. The US regained around two-thirds of its production losses in the third quarter.
The economic weakness of Japan is likely to accelerate the discussion of a third supplementary budget for this fiscal year. Yoshihide Suga, the prime minister, has ordered a new spending package that could total ¥ 10 billion ($ 95.5 billion).
Consumption rose 4.7 percent in the third quarter, fueling the rebound, but corporate investment declined another 3.4 percent. The decline in investment came on top of a 4.5 percent decline in the second quarter, underscoring the bleak outlook for many companies affected by the disease.
Japan’s economy was already struggling before Covid-19 hit after a consumption tax hike last fall drove it into recession.
With interest rates already at zero, the Bank of Japan responded to the downturn by buying more equity funds and flooding the banking sector with cheap credit.
The main response came from the government, which has launched various programs, including a 100,000 yen handout for each person in the country.
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