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.
