ENGLISH_ECONOMIC DEVELOPMENT DEPARTMENT_B1_GROUP 2 / Ni Luh

Komang Ayu Herlina Sistadewi (2107511015) / Luh Putu Pratiwi Padmawati

(2107511025) / I Gusti Ayu Inten Pratiwi (2107511030) / Ni Wayan Nia Lestari
Sukantiasih (2107511012) / Ketut Dyana Novita Sari (2107511305)

Japan’s Economy Shrinks, but Outlook Is Brighter as Virus Ebbs

“The coronavirus and supply chain issues stymied growth in the third quarter, but high
vaccination rates and low numbers of virus cases point to a recovery.”

By Ben Dooley and Hisako Ueno - The New York Times

Nov. 14, 2021

Japan’s economy continued to wobble in the third quarter of 2021, tipping back into
contraction, as the country struggled to find its economic footing in the face of coronavirus
restrictions and a supply chain crunch that hit its biggest manufacturers.

In the July-to-September period, the country’s economy, the third largest after the United
States and China, shrank by an annualized rate of 3 percent, government data showed
on Monday. The result, a quarterly drop of 0.8 percent, followed a slight expansion in the
previous three-month period, when economic output grew at a revised annualized rate of
1.5 percent, or a quarterly rate of 0.4 percent.

But brighter days may be ahead, at least in the near term.

Japan now has one of the highest vaccination rates among major nations, and it has lifted
virtually all restrictions on its economy as its virus caseload has fallen in recent weeks to
one of the lowest levels in the world.

Seventy-five percent of the country is fully vaccinated. And coronavirus case counts have
hovered in the low hundreds since mid-October, a decline of about 99 percent since their
August peak, heralding the return of long-suppressed consumer spending.
Bolstering the positive outlook, policymakers, fresh off an election, are preparing a new
round of stimulus that would provide support to ailing businesses and put cash in the
hands of people nationwide.

The payments are likely to be more effectiver than previous ones, which went straight into
people’s savings accounts, said Wakaba Kobayashi, an economist at the Daiwa Institute
of Research in Tokyo.

“This time, people are less constrained; it’s become OK to go out,” she said, adding that
“under these conditions, it’s easier to promote consumer spending.”

Even before the pandemic, Japan, with its aging population and waning business
competitiveness, was struggling to achieve economic growth. After a growth spurt in the
second half of last year, the economy has been stuck in a cycle of expansion and
contraction, ebbing and flowing with the virus’s waves.

While other major economies have returned to life on the back of loosened restrictions,
Japan has seemed unable to extricate itself from the virus-induced quagmire, the
consequences of months spent struggling with the pandemic.

The country started the July-to-September period on the back foot because of a clunky
vaccine rollout that left it far behind its peer countries.

By midsummer, it was in the midst of its toughest battle yet with the virus. The Delta
variant caused cases to surge just as Tokyo prepared to kick off the Summer
Olympics. Sponsors rolled back advertising campaigns, and tourists stayed home. The
Games, which were conducted without spectators, failed to deliver the economic boost
that had been promised when the country was chosen as host.

As the virus spread, Japan entered a new state of emergency. Restaurants and bars
closed early and travel dried up, with many people deciding to stay home rather than
brave record-high case counts.

At the same time, semiconductor shortages battered the country’s automakers, forcing
many to drastically cut production. In September, the top eight Japanese manufacturers
made about half as many cars as they had at the same time in the previous year.

“There was an enormous drop in production, and even if people wanted to buy cars, they
couldn’t,” Ms. Kobayashi said.
Since the country ended its state of emergency last month, however, foot traffic has nearly
returned to prepandemic levels, said Tomohiko Kozawa, a researcher at the Japan
Research Institute.

“There’s a risk that infections could begin to spread again, but for the moment, the outlook
points to recovery,” he said, adding that “we can expect high growth” in domestic
consumption in the coming months.

The auto industry, too, is expected to rebound, he said, as chip manufacturers expand
production and the pandemic ebbs in Southeast Asia, where the virus shut down factories
that manufacture critical parts for Japanese vehicles.

“Exports should recover in the first three months of next year,” Mr. Kozawa said.

Hoping to get the economy back on track, the government is expected to pass its
economic stimulus package in the coming days, which would provide cash handouts to
families with children under 18, give aid to small businesses and put in place measures
to offset rising fuel prices, which have increased costs across a range of industries.

Still, other factors will continue to weigh on growth. The country remains closed to tourists
— and difficult to enter for many businesspeople and students — and it is unclear when
the borders might reopen. Before the pandemic, many businesses in Japan had relied on
a steady stream of visitors from abroad.

Although the country should be congratulated for its success in tackling the virus, it needs
to articulate a vision for what comes next, said Daisuke Karakama, chief market
economist at Mizuho Bank.
Even as daily reported infections in Tokyo have dropped to low double digits, “there’s no
road map” he said, and “no strategy.”