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Editorial: Japan still far from full economic recovery despite GDP growth

  • November 18, 2020
  • , The Japan News , 12:00 p.m.
  • English Press

The economy, which plummeted after the outbreak of the novel coronavirus pandemic, has begun to recover. However, there are many causes for concern, such as a resurgence of the infectious disease. The government must take all possible measures to shore up employment and boost the economy.

 

A preliminary report on real gross domestic product (GDP) for the July-September period showed an annualized 21.4% increase from the previous quarter, the largest expansion since comparable data became available in 1980. Personal consumption and exports significantly improved from the previous quarter, according to the report.

 

This was mainly due to the rebound from the previous quarter, when the rate of decline was the largest since the end of World War II because economic activities stagnated following the government’s declaration of a state of emergency and other coronavirus-related factors. In terms of real value, the GDP expansion in the July-September quarter was only a little more than half of the amount lost in the previous quarter.

 

The government must recognize anew the harsh reality of the current situation and make efforts to balance infection prevention and economic revitalization measures.

 

Personal consumption, which accounts for more than 50% of GDP, increased by 4.7% from the previous quarter. Sales of home appliances were brisk due to the government’s provision of a cash handout of ¥100,000 per person and other support measures. Consumption of services, such as travel and dining out, is also recovering, according to the report.

 

Exports increased by 7.0%, with growth in automobiles and electronic parts, among other products. There was an increase in exports to Europe and the United States, as well as to China, whose economy has recovered earlier than other parts of the world.

 

On the other hand, business and household sentiment remain subdued. Corporate investment in plants and equipment has been sluggish, falling by 3.4%. Housing investment, a major expense for individuals, fell by 7.9%.

 

It is also unlikely that the recovery in consumption and exports will continue smoothly in the future.

 

The number of coronavirus cases in Japan is on the rise, which is likely to have a negative impact on service consumption. As winter bonuses are expected to decrease, there are concerns about worsening employment conditions, which could adversely affect consumption.

 

The outlook for exports is also uncertain as the number of infections in the United States and Europe has been increasing again and some countries are moving to implement restrictions on going out.

 

Measures to ease public anxiety are urgently needed. The government is drafting a third supplementary budget. It should make efforts to stabilize employment by extending special measures, including raising the upper limit of employment adjustment subsidies to help companies pay allowances to workers who have been put on leave.

 

Airlines and other companies have started to transfer their employees to other companies. It is desirable to expand efforts to match firms that have a temporary surplus of employees with companies that have a labor shortage.

 

It is important to raise the potential growth rate, which reflects the real capacity of the economy. It is advisable to consider making the environmental field a catalyst for growth.

 

The prime minister has set a goal of reducing greenhouse gas emissions to virtually zero by 2050. In addition to Europe, the United States is expected to step up efforts to combat global warming.

 

The Japanese government should present concrete measures as soon as possible to encourage corporate investment. It is hoped that the public and private sectors will work together on technological innovations, such as hydrogen utilization and storage batteries.

 

— The original Japanese article appeared in The Yomiuri Shimbun on Nov. 18, 2020.

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