Japan’s Economy Surged in the Brief Window Before Omicron

Surging commodities prices and a weak yen are also putting the first real upward pressure in decades on the price of consumer goods, creating another potential headwind for consumption.

“Even without the state of emergency, people’s mobility was down a lot because of the big threat of the Omicron variant,” Mr. Baba said. Tokyo and other parts of the country have been under a quasi-state of emergency as Omicron cases rose.

But the situation is likely to improve as spring turns to summer and, businesses hope, the virus’s impact on the economy wanes. Barring the appearance of another disruptive variant, the prospects look good: As in other countries, Omicron has so far proved much less virulent than previous variants, and case numbers — which surged to their highest levels during the pandemic last month — appear to have already peaked.

“In the medium term, there’s a lot of potential for Japan’s economy to accelerate,” said Izumi Devalier, the head of Japan economics at Bank of America.

Still, one long-term concern among economists is that the virus may have caused the economic equivalent of long Covid, indefinitely weakening consumption patterns among consumers who have become used to going out less and staying home more, she said.

Ms. Devalier, however, remains sanguine that consumer sentiment will rebound as the virus recedes. “What we’ve noticed is every time the virus ebbs, every time a virus wave peaks out and you have a reduction in virus risk, consumer spending surges quite strongly,” she said.

Article source: https://www.nytimes.com/2022/02/14/business/japan-economy-gdp-covid.html