Japan’s Economic system Surges, however Covid-19 Looms

While many consumers sought refuge in the West this fall, people in Japan traveled, dined and went to the movies. One film, Demon Slayer: Mugen Train, set a domestic box office record, beating the former champion in a matter of months. Government subsidies for travel have ended domestic tourism, although such travel may also have spread the virus.

Updated

Apr. 14, 2021 at 8:48 am ET

At the same time, enormous government stimulus efforts have helped keep people in jobs and companies in companies. The unemployment rate in Japan was just 2.9 percent at the end of December compared to 2.1 percent in the previous year. According to Teikoku Databank, a credit research firm, bankruptcies even fell 6.5 percent in 2020.

In contrast to the economic damage, the country’s stock market is at a high level and benefiting from monetary policy, which has kept interest rates extremely low and pumped money into the stock markets. On Monday morning, the Nikkei hit 30,000 for the first time since the Japanese economic bubble burst 30 years ago.

However, the last two quarters of the growth failed to offset the damage caused by the pandemic. The economy fell by 4.8 percent over the course of the year. This was the first annual decline since 2009, when the country suffered the aftermath of the global financial crisis.

While the people of Japan don’t face the same short-term economic threat as the US, growth is expected to slow again in the first three months of this year.

After a sharp increase in the daily number of infections, Japan declared a second, albeit more limited, state of emergency in early January. The edict, originally announced for a month, was extended to early March, in part in response to the emergence of new, more contagious variants of the coronavirus.

“Because of the urgency, consumer spending, especially on services, will decrease in the first three months of the year,” said Akane Yamaguchi, an economist at the Daiwa Institute of Research.

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