Japan’s biggest expansion in more than a half century outpaced expectations as exports and consumption powered growth, though the recovery is likely to cool this quarter as the virus sets new infection records at home and overseas.
Gross domestic product grew an annualized 21.4% in the three months through September from the previous quarter, expanding at the fastest clip since 1968, helped by government stimulus that fueled a sharp jump in consumer spending and a strong pickup in trade. Economists had forecast an 18.9% expansion.
The nation’s biggest growth spurt in more than a half century shows the economy is back on a recovery path after three straight quarters of contraction that started with a sales tax hike last year before the collapse that came with COVID-19’s first wave.
Still, the rapid expansion only managed to claw back about half of the growth lost since last year, less than some other major economies. With the virus’s resurgence likely to keep a lid on further export and consumption gains, the government is already making plans to add to stimulus.
“There is no way we can be optimistic about the outlook,” said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute. “Virus cases are rising at home and abroad and that will weigh on global demand and household sentiment.”
Concern the economy will lose steam last week prompted Prime Minister Yoshihide Suga to call for a third extra budget. New spending would add to the country’s mountain of debt, but it’s seen as necessary as the boost from the government’s earlier cash handouts weakens and funds for a job furlough program run out.