Japan economy rebounds despite virus surge

Japan’s economy grew slightly in the second quarter, recovering from a slowdown at the start of the year despite continuing virus surges and restrictions, data showed Monday.

The world’s third-largest economy contracted at the beginning of the year as a new wave of infections forced the government to impose virus restrictions that slowed consumption.

But despite continued virus worries and restrictions that have lasted most of this year, Japan’s economy grew a better-than-expected 0.3 percent in the three months to June, data from the cabinet office showed. That slightly exceeded the expectations of economists surveyed by Bloomberg, who had forecast just 0.1 percent quarter-on-quarter growth.

The data released by the cabinet office also showed a slight upwards revision for the first quarter, when the economy shrank 0.9 percent, compared with a previous estimate of 1.0. But for much of this year Tokyo and several other regions have been under virus states of emergency, limiting alcohol sales and restaurant and bar opening hours.

Experts have warned the measures are losing their effectiveness, with signs the rules are being increasingly flouted.

Stefan Angrick, a senior economist at Moody’s Analytics covering Japan, said consumption proved surprisingly resilient despite the restrictions.

“The Japanese economy eked out some moderate growth in the second quarter of the year, avoiding a technical recession thanks to a combination of stronger consumption and business investment,” he said in a note.

“Despite the improvement, we expect growth to remain under pressure in the third quarter as spending and production continue to struggle amidst disruptions from the pandemic.”

Japan is also playing catch-up with its vaccine programme, which began much later and more slowly than those in many other developed economies.