Oxford Economics’ monthly growth tracker for the Japanese economy shows that, while the state of emergency in first quarter 2021 will cause a decline in consumption and services, production and trade continue to hold up well, reflecting strong foreign demand and a buoyant manufacturing sector.
This supports Oxford Economics’ view that the drop in Japan’s GDP in the first quarter will be mild, setting back the recovery without derailing it. Indeed, despite near-term challenges, the outlook for 2021 overall is improving, particularly for external demand and capital spending.
Oxford Economics expects mobility and spending will recover gradually from second quarter onward, reflecting the lifting of the state of emergency, the rollout of coronavirus vaccines, and a resumption of policy support for domestic travel. GDP growth should pick up further going into second quarter 2021 thanks to solid foreign demand and a more substantial normalization in the services sector.
