Japan’s economy projected to grow 3.42% by end of next fiscal year
Following a 5.37% shrinkage this fiscal year, Japan’s economy is projected to grow 3.42% in the fiscal year ending March 2022, according to the average forecast of 35 economists polled by the Japan Center for Economic Research.
If this projection pans out, the country will see a recovery from the worst contraction to the highest growth since fiscal 1995, when comparative data became available.
As vaccinations for COVID-19 become widespread by summer, consumer spending will likely gain momentum.
“Japan’s economy is going to benefit from the effect of nationwide vaccination,” said Itochu Research Institute chief economist Atsushi Takeda.
Prime minister Yoshihide Suga has pledged to obtain enough vaccine shots for the country’s needs by the first half of 2021, and the government estimates 4.0% growth next fiscal year.
If coronavirus vaccines become available as planned, service industries such as entertainment, transportation and travel companies will be among the sectors to reap significant benefits, said Dai-ichi Life Research Institute chief economist Toshihiro Nagahama.
“Domestic consumption in the service sector could possibly normalise in the latter half of the year” when restrictions are expected to be lifted on human mobility and personal contact, Nagahama said.
In addition, if the postponed Tokyo Olympics and Paralympics go ahead from July this year as currently planned, the economy will get a one-off boost. The Tokyo Games are likely to spur spending this year, economists said.
The Organisation for Economic Cooperation and Development last month raised its forecast for Japan’s growth for 2021 to 2.3%, saying the summer’s games will “temporarily boost consumption”.
The NLI Research Institute estimated last March that the postponed games would carry over demand worth 2 trillion yen (US$19.4 billion) to the next fiscal year.
The Itochu Research’s Takeda said the games will not only lift personal spending, but also strengthen consumer confidence, according to Kyodo News.