Positive Signs Emerge After a Challenging Year for Japan
Japan, the third-largest economy globally, faced unique challenges during the COVID-19 pandemic due to its smaller size and densely populated metropolitan areas. In 2020, Japan saw a 4.8% economic contraction, a figure slightly better than the 5.3% projected by the International Monetary Fund. However, compared to economies like the United States, which experienced a 3.5% drop, the decline was significant. The latest GDP reports indicate a potential upturn for Japan after this period of economic strain.
The recent GDP data revealed that Japan’s economy expanded by 3% in the fourth quarter of the year, resulting in an annualized growth rate of 12.7%, surpassing analyst expectations. This positive development has propelled the Nikkei 225 stock index to a 1.9% increase, crossing the 30,000-point mark for the first time in over three decades.
“The strong [performance] indicates that the economy is steadily recovering from the impact of the pandemic,” noted Stefan Angrick, a senior economist at Oxford Economics.
“However, recent high-frequency data suggests a slowdown in momentum in December due to a rise in COVID-19 cases.”
While Japan is currently grappling with a new surge in COVID-19 infections, leading to localized states of emergency, analysts believe that despite these challenges, the overall economic growth trajectory remains positive.
Japan’s Nikkei briefly surpasses 30,000 for the first time in 30 years https://t.co/BEUxec24Qe
— MarketWatch (@MarketWatch) February 15, 2021
“Currently, Japan’s economic outlook appears more optimistic, with diminishing downside risks. While the recent surge in local COVID-19 cases has peaked, the approval of the Pfizer vaccine marks a significant milestone, enabling the vaccination campaign to commence this week,” stated Shahana Mukherjee, an economist at Moody’s Analytics, in an interview with CNN.
“Our outlook for Japan’s recovery in 2021 is cautiously optimistic, contingent on the smooth progress of the vaccination campaign,” she added.
