World

Japan’s economy expands more than expected as trade, capex lend support

Reuters Tokyo | Updated on February 15, 2021 Published on February 15, 2021

Q4 GDP grows annualised 12.7% vs forecast +9.5%; external demand adds to GDP growth; new curbs to contain pandemic cloud economic outlook

Japan's economy expanded more than expected in the fourth quarter, extending its recovery from its worst postwar recession thanks to support from firm exports, consumption and capital expenditure.

However, the pace of recovery slowed from the blistering pace seen in the third quarter, underscoring the challenge policymakers face in keeping the economy afloat as new emergency measures to prevent the spread of Covid-19 hit demand.

The world's third-largest economy grew an annualised 12.7 per cent in October-December, government data showed on Monday, marking the second straight quarter of increase and exceeding a median market forecast for a 9.5 per cent gain.

It was a slowdown from a revised 22.7 per cent surge in the previous quarter, when the economy got a lift from pent-up demand after a previous state of emergency was lifted in May.

For the full coronavirus-stricken year, Japan's economy contracted 4.8 per cent, marking the first annual fall since 2009.

The growth translated into a quarter-on-quarter increase of 3.0 per cent, the Cabinet Office data showed.

A global rebound in manufacturing activity gave exports a much-needed boost, making up for some of the weakness in domestic demand, the data showed.

External demand, or exports minus imports, added 1.0 percentage point to fourth-quarter GDP growth, matching a median market forecast.

Private consumption, which makes up more than half of Japan's economy, rose 2.2 per cent after a 5.1 per cent increase in the previous quarter. That compared with market forecasts for a 1.8 per cent gain.

Capital expenditure grew 4.5 per cent, marking the first increase in three quarters, the data showed.

Japan's economy has gradually emerged from last year's initial state of emergency curbs thanks to a rebound in exports.

But the government's decision to roll out new restrictions from January has heightened the chance of another recession, clouding the outlook for a fragile recovery.

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Published on February 15, 2021
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