Japan's economy rebounds in April-June, Covid-19 clouds outlook

TOKYO (REUTERS) – Japan’s economy rebounded more than expected in the second quarter after slumping in the first three months of this year, data showed, a sign consumption and capital expenditure were recovering from the coronavirus pandemic’s initial hit.

But many analysts expect growth to remain modest in the current quarter as state of emergency curbs reimposed to combat a spike in infections weigh on household spending.

The world’s third-largest economy grew an annualised 1.3 per cent in April-June after a revised 3.7 per cent slump in the first quarter, preliminary gross domestic product (GDP) data showed, beating a median market forecast for a 0.7 per cent gain.

Still, the rebound was much weaker than that of other advanced economies, including the United States, which marked a 6.5 per cent annualised expansion in the second quarter, highlighting the fallout from Tokyo’s struggle in containing the pandemic.

On a quarter-on-quarter basis, GDP grew 0.3 per cent compared with market forecasts for a 0.2 per cent increase, the data showed.

Consumption rose 0.8 per cent in April-June from the previous quarter after a 1 per cent drop in January-March. Capital expenditure also increased 1.7 per cent after falling 1.3 per cent in the previous quarter, the data showed.

Domestic demand contributed 0.6 per cent point to GDP growth.

Exports rose 2.9 per cent in April-June from the previous quarter in a sign the global recovery continued to underpin the country.

Japan’s economy emerged from last year’s initial blow from the pandemic thanks to robust exports, though slow vaccinations and repeated state of emergency curbs have hurt consumption.

A spike in Delta variant cases in Asia has caused supply chain disruptions for some Japanese manufacturers, which could weigh on factory output and add to gloom for an already fragile economic recovery.

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