The Japanese economy is having a hard time overcoming the pandemic. After closing the 2021 financial year with a timid expansion, its gross domestic product (GDP) contracted by 0.2% between January and March of this year compared to the previous quarter. A pattern of advances and setbacks that has marked the evolution of the world's third largest economy since the coronavirus entered the scene two and a half years ago.
The drop in this last quarter is due to a combination of factors. On the one hand, Tokyo implemented new control measures and restrictions in January as, spurred by the omicron variant, the number of coronavirus cases reached the highest levels of the pandemic.
It was also affected by the Russian invasion of Ukraine, with the consequent skyrocketing of energy prices, a severe blow to a country that hardly has its own resources and depends above all on imports to feed its powerful industry. Or the restrictions and interruptions of the logistics chains imposed to curb the coronavirus in China, the largest market for its exports and a key supplier of parts for its manufacturers.
As a result, household spending, the main component of Japan's GDP, remained flat in the first quarter of the year. For its part, the value of exports, another of its main indicators, grew by 1.1% quarter-on-quarter. Meanwhile, that of imports rose by 3.4% due to the rise in the price of raw materials and the devaluation of the yen against other currencies such as the dollar, with which it registers lows not seen for decades.
In addition, if corporate capital investment fell by 0.6%, state investment also fell by 3.6% after the Government launched a multi-million dollar aid plan for the economy during the last part of the previous year (56 billion yen, 433,000 million euros to change). Another large round of stimulus is expected to be passed in the coming weeks.
Since the covid-19 appeared, Japan has combined periods of decline with others of growth, without yet reaching the levels of development prior to the pandemic. “The pace has been slow. It is the only country among the major economies - the United States, China, the European Union - that has not recovered," Shinichiro Kobayahi, an economist at Mitsubishi UFJ, told The New York Times.
Now that most anti-covid restrictions have been lifted, analysts expect the economy to post a positive rebound in the second quarter of the year. Still, most are cautious given the challenges they face.
“We see three headwinds to the expected recovery. First, rising food and energy prices. Second, the burden of confinement in China. And third, the risk of a possible resurgence of virus infections (and the imposition of new controls)," economists Musamichi Adachi and Go Kurihara stressed in a UBS bank note.
"The biggest risk is that the coronavirus starts to spread again," added Naoyuki Shiraishi, an economist at the Japan Research Institute. "If a new variant appears, there will be new restrictions on activity, and that will suppress consumption," he added.
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