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Japanese economy slump in the first quarter of 2021

18 May 2021 10:59 AM

The Japanese economy contracted in the first quarter of 2021 amid the resurgence of Coronavirus infections, but the economy is expected to return to growth as soon as possible in the current quarter with the help of industrial exports.

The third largest economy in the world after the US and China contracted by 5.1% on annual basis in the first quarter after growth in the latter half of 2020. Private spending decreased by 1.4% from the previous quarter. Shops and restaurants closed or reduced their opening hours during the January-March state of emergency in regions including Tokyo and Osaka, which was re-imposed in late April, and capital expenditures fell 1.4% after strong growth in the previous quarter.

Many economists see the economic downturn as a temporary interruption in the country's recovery from the epidemic. Japan is benefiting from a comeback in the United States and China, its largest trading partner, as foreign demand for Japanese goods such as cars and electronic parts is increasing, helping to balance weaker service industries such as travel and restaurants.

The export-led recovery stalled as consumption hurt by a spike in new virus strains that forced the government to reimpose restrictions just 10 weeks before the Tokyo Olympics.

"Japan still has the potential to recover," said Economy Minister Yasutoshi Nishimura, citing a recovery in exports. He also said the recent emergency hadn't hit consumption as much before.

Japanese companies are expecting industrial output in April to rise 8.4% from the previous month.

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