Japan GDP Shrinks More Than Expected Due to Covid-19 and Supply Chain Disruptions

Japan’s economy shrank more than expected during the third quarter due to global supply chain disruptions and a hit to spending caused by a resurgence in Covid-19 cases.

The contraction comes as Fumio Kishida, the newly appointed prime minister, plans to soon unveil a massive stimulus package of cash handouts and subsidies for small businesses to spur growth.

The economy contracted at an annualised rate of 3 per cent in the July to September quarter, falling sharper than market expectations for a 0.8 per cent contraction.

On a quarter-on-quarter basis, gross domestic product fell 0.8 per cent compared with growth of 0.4 per cent in the second quarter, according to government data released on Monday.

Most economists, however, expect a rebound in the coming quarters led by a recovery in personal consumption with the recent lifting of Covid-19 restrictions and a sharp drop in cases.

“Although personal consumption was more negative than expected, monthly data show that it picked up in September despite continued weakness in auto sales related to low production,” said John Vail, chief global strategist at Nikko Asset Management.

Source: https://www.ft.com/content/629686f4-b0db-4b23-853c-26a6fa42c22e

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