Japan’s Economy Returns to Growth, but Virus Threat Looms

Japan saw a burst of economic activity in the second half of 2020, with two consecutive quarters of growth, as consumers returned to empty restaurants, bars and theaters and began to crisscross the country on trips underwritten by a government recovery plan.

But the winter brought an increase in coronavirus cases, and since then, the country has continued to seesaw between opening up and closing down. The measures are largely voluntary, and each iteration has been less effective at keeping people home. But even so, they have powerfully suppressed economic activity in Japan, which even before the pandemic was struggling to produce more than modest levels of growth.

Now, recovery will depend on whether the government’s vaccination program and other efforts can control the virus’s spread. The country is giving over a million shots a day. If it can keep up that pace, it will top vaccination levels in the United States and Britain by early autumn.

But the appearance of the more contagious Delta variant in Japan raises the possibility that the country may no longer be able to keep the virus at manageable levels. Case numbers have raced up since July, with no end in sight, as control measures seem to have lost their potency.

With people tired of limiting their daily activities and less willing to stay home, Japan may have to make a “qualitative” change to its virus control tactics, such as putting stricter curbs on business activity, said Mr. Ota, the Goldman Sachs economist.

“The current state of emergency can’t really contain people and mobility,” he said, adding that “one possible kind of risk is that the government decides to tighten the regulations once again,” with a correspondingly large impact on consumption.

If the vaccine program proceeds apace, however, Japan “will return to normal economic activity,” said Keiji Kanda, a senior economist at the Daiwa Institute of Research.

Article source: https://www.nytimes.com/2021/08/15/business/japan-economy-gdp-second-quarter.html