(ATF) Japan’s output fell a more-than-expected 1.3% in the first quarter of 2021 as a new Covid-19 state of emergency crimped consumer spending.
The decline in gross domestic product (GDP) – at an annualised rate of 5.1% – marked a return to contraction after the economy expanded in the final quarter of 2020.
The data suggested that Asia’s largest rich economy will be slow to bounce back from the pandemic because of its slow rollout of coronavirus vaccines.
Capital expenditure also fell unexpectedly and export growth slowed sharply.
The extended state of emergency curbs have heightened the risk Japan may shrink again in the current quarter and slide back to recession, defined as two straight quarters of recession, some analysts say.
“We will revisit our GDP growth forecasts for the second quarter onward and now see an increasing possibility of a second consecutive quarter of negative growth,” Barclays analyst Tetsufumi Yamakawa said.
BULLISH MARKET
Tokyo stocks were bullish on Tuesday morning, with the benchmark Nikkei briefly rising over 2.2%, as buybacks kicked in on hopes of an economic recovery in Japan due to the accelerated coronavirus vaccine rollout.
Every industry category gained ground, except for electric power and gas issues.
Covid-19 infections are running at about 6,000 a day, the highest rate since January.
Under the emergency, people have been asked to work from home when possible and restaurants ordered to close at 8pm.
“The fall highlights the negative impacts of restrictions on movement during states of emergency,” Robert Carnell, head of Asia research at ING, said.
“And with more of these being unfurled in the second quarter, the prospects for growth in the rest of the year are looking much weaker.”
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