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Japan’s GDP Shrinks Less Than First Reported Amid Emergency

Economic IndicatorsJun 08, 2021 11:14
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(Bloomberg) -- Japan’s economy shrank last quarter less than first reported, according to figures that come as yet another round of restrictions to contain the coronavirus threatens to prolong the slump.

Gross domestic product contracted an annualized 3.9% from the final quarter of 2020, the Cabinet Office reported Tuesday. The result was better than the government’s earlier estimate of a 5.1% contraction. Economists had forecast a 5% drop.

A separate report showed wages gained in April from a year earlier at the fastest pace since late 2018 on climbing overtime pay.

Key Insights

  • Since the start of the year, Japan’s recovery has been put on pause by on-again-off-again declarations of emergency to try to contain virus flareups. A vaccine drive that didn’t kick into high gear until recent weeks has allowed the crisis to drag on, even if case numbers are still far below U.S. or European levels.
  • With restaurants and bars being advised to close early, consumer spending has taken a hit and service businesses have chosen to cut or at least postpone investment until the outlook is clearer.
  • While exports continue to rebound, the latest round of restrictions set to last through mid-June -- about a month before the planned start of the Tokyo Olympics -- have raised the risk the economy could shrink again this quarter. That would mean a double-dip recession, although most analysts still see Japan eking out growth this spring.
  • So far, another large-scale stimulus package from Prime Minister Yoshihide Suga’s government doesn’t seem to be on the cards. Finance Minister Taro Aso last month said he doesn’t think Japan needs to compile another budget to deal with the pandemic because there’s 4 trillion yen ($37 billion) left in a reserve fund.

What Bloomberg Economics Says...

“Japan is likely headed for another recession, with GDP on track to contract in the second quarter due to pressures from virus-related restrictions on activity. Revised GDP data for 1Q may show the early part of the downturn was a little less steep than the preliminary reading showed.”

--Yuki Masujima, economist

For the full report, click here.

Get More

  • On a non-annualized basis GDP lost 1% from the previous quarter, compared with -1.2% forecast by analysts.
  • Nominal GDP contracted 1.3%. Economists had expected -1.6%.
  • Private consumption dropped 1.5% from the prior quarter, compared with -1.4 forecast by economists.
  • Business investment fell 1.2%, matching the forecast from analysts.
  • Inventories added 0.4 percentage point to GDP, compared with a 0.3 percentage point contribution expected by economists.
  • Net exports of goods and services subtracted 0.2 percentage point from GDP growth, matching the forecast.
  • A separate report showed labor cash earnings rose 1.6% in April compared with the prior year, double the gain forecast by analysts.

(Adds details of growth report.)

©2021 Bloomberg L.P.

Japan’s GDP Shrinks Less Than First Reported Amid Emergency

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