Japan's economy shrinks less than first reported during Covid-19 emergency

TOKYO • Japan's economy last quarter shrank 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 annualised 3.9 per cent from the final quarter of last year, the Cabinet Office reported yesterday. The result was better than the government's earlier estimate of a 5.1 per cent contraction. Economists had forecast a 5 per cent drop.

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

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 flare-ups.

A vaccine drive that did not kick into high gear until recent weeks has allowed the crisis to drag on, even if case numbers are still far below United States 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 the middle of this month - about a month before the planned start of the Tokyo Olympics - has raised the risk of the economy shrinking 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 does not seem to be on the cards.

Finance Minister Taro Aso said last month that he does not think Japan needs to compile another budget to deal with the pandemic because there is four trillion yen (S$48.3 billion) left in a reserve fund.

BLOOMBERG

Follow ST on LinkedIn and stay updated on the latest career news, insights and more.

A version of this article appeared in the print edition of The Straits Times on June 09, 2021, with the headline Japan's economy shrinks less than first reported during Covid-19 emergency. Subscribe