DC Witter Group Optimistic on Japan's Economic Recovery

HONG KONG, January 6, 2021 (Newswire.com) - Already struggling to cope with a range of economic challenges, the world’s third-largest economy was ill-prepared for the economic devastation the coronavirus would bring in 2020. In the third quarter of last year, Japan suffered its worst contraction on record. GDP plunged by 7.8% in the period from April to June, a whopping 29.2% on a yearly basis.

Japan is heavily reliant on domestic consumption, which makes up more than half of its economy. A significant decline in domestic consumption, along with a fall in exports as global trade was affected by the pandemic caused the already fragile economic growth to decline for a third consecutive quarter.

Economic rebound gains momentum

As economic activity began to gradually resume in the following quarter, Japan’s economy rebounded with an annualized growth of 22.9%.

Although it has not yet made up for losses during the second quarter, Japan’s economic recovery has maintained momentum. DC Witter Group analysts are optimistic about Japan’s economic prospects for this year, provided it can keep control of the pandemic. GDP is expected to expand by 3.42% this year as the impact of the coronavirus eases.

Rebuilding the economy post-pandemic

Japan’s government has pledged to help the economic recovery with fresh stimulus planned for early this year and has promised to facilitate nationwide vaccinations as soon as possible.

Japanese Prime Minister, Yoshihide Suga, has announced that Japan intends to procure enough Covid-19 vaccines to meet the needs of the population by June this year. This will give a much-needed boost to consumer spending and confidence.

Analysts at DC Witter Group say availability of the vaccine will enable the resumption of business in sectors worst affected by social distancing measures and would likely see domestic consumption return to pre-pandemic levels before the end of this year.

Creating an environment where the pandemic is seen to be under control would also mean that the Tokyo Olympic Games could be scheduled for this year after a last-minute postponement last year.

However, DC Witter Group analysts have cautioned that failure to bring the most recent wave of infections under control could jeopardize Japan’s economic recovery this year.

Source: DC Witter Group