Rebound, Japan's Economic Growth in Quarter IV-2021 Reaches 5.4%

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Rebound, Japan's Economic Growth in Quarter IV-2021 Reaches 5.4%


The Japanese economy recovered in the fourth quarter of 2021 after the decline in coronavirus cases which helped support public consumption. However, rising costs in raw materials and a surge in infections of new Omicron variants clouded the outlook for the Japanese economy further.

Tuesday (15/2), the Japanese government released that the third largest economy grew 5.4% year on year (yoy) in the October-December 2021 period. This rebound occurred after in the previous quarter, the Japanese economy contracted 2.7% in a revised economic growth.

Despite soaring, it turns out that Japan's economic growth in the fourth quarter of 2021 is still below the market projection with an average increase of 5.8%.

Japan's economic growth was largely driven by a 2.7% increase in private consumption, which accounts for more than half of Japan's gross domestic product (GDP). This growth was higher than the market forecast for a 2.2% increase.


Meanwhile, capital spending rose 0.4%, or was below the market's forecast for a 0.5% increase. External demand added 0.2% point to GDP growth in October-December, compared to the market forecast of a 0.3 point contribution.

Japan ended its state of emergency restrictions to combat the pandemic from October last year, after a decline in Covid-19 cases, helping lift consumption through the end of 2021.

Some analysts expect the economy to contract again in the first quarter of 2022. This comes as rising Covid-19 cases and supply chain disruptions hit factory output, increasing the challenges for policymakers in sustaining a fragile recovery.

The surge in Omicron cases has forced the government to impose loose restrictions on most areas and close borders, possibly reducing consumption since the start of this year.

Rising Omicron infections have also forced some manufacturers to halt production, causing output disruptions and delivery delays at auto giants such as Toyota Motor Corp.


Some analysts expect Japan's economy to decline in the current quarter as chip shortages, supply bottlenecks and slowing Chinese growth weigh on output, adding to the expected weakness in consumption.


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