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Japan: Q1 Economy Update – May 2021

May 28, 2021

Prepared by the New Zealand Embassy in Tokyo

https://www.mfat.govt.nz/en/trade/mfat-market-reports/market-reports-asia/japan-q1-economy-update-may-2021/

Summary

  • All of Japan’s major cities are currently under a third COVID-19 state of emergency, which has been extended until the end of May (for now). Since the state of emergency was declared on 25 April, new infection numbers have stabilised in Tokyo, Osaka and surrounding areas. There is considerable strain on the healthcare system, particularly around Osaka. 90% of new infections are thought to be due to new, more infectious variants which have displaced the original strain of the virus.

  • In mid-February, Japan began the roll-out of the Pfizer/BioNTech vaccine to healthcare workers and from April to over-65s. PM Suga has set a target of one million doses to be delivered daily, about three times the current rate, aiming to have all over-65s and health care workers (total 40m people) vaccinated by end of July.

  • New Zealand’s goods exports to Japan dropped by 13% year-on-year in Q1 2021, compared to what was a bumper Q1 in 2020. New Zealand exports were also down to Australia (-15%), the US (-11%) and South Korea (-5%), but up to China (+22%) in Q1 2021. Breakdown by main sectors:

  • Despite the overall downward trend, certain goods exports to Japan had a bumper Q1:

    • Kiwifruit +9% to $54 million (new record)

    • Pacific Salmon: frozen (+160% to $3 million) and chilled (+70% to $2 million)

    • Jack and horse mackerel (frozen): +3,000% to $0.9 million.

  • Japan GDP: After two quarters of positive growth, Japan’s GDP decreased in Q1 compared to the previous quarter, dropping -5.1% (real, annualised), equivalent to a -1.3% contraction on a seasonally adjusted basis. For fiscal 2020 (April 2020-March 2021), Japan’s GDP decreased a real 4.6% year-on-year. This was the largest contraction on record since records began in 1955.

  • Japan GDP forecast: According to a Japan Centre for Economic Research survey of 37 private-sector think tanks, the consensus GDP forecast is for an annualized growth 1.8% percent in Q2 2021. Looking forward, the consensus forecast is that real GDP will grow by +3.7% in the April 2021-March 2022 year, and +2.2% in the April 2022-March 2023 year.