Second wave not capsizing the economy

Despite the reintroduction of states of emergency in some prefectures, and renewed calls for jishuku (“self-restraint”) in many others, the steps taken by local authorities to curb the “second wave” of coronavirus cases have so far been tentative and narrow. As such, the impact on economic activity has been small. The number of restaurant goers, if anything, edged higher in July having already rebounded in June. Economy Minister Nishimura’s request in late-July for firms to ensure 70% of their employees work from home has not been heeded thus far. Morning commuter numbers on the Tokyo subway are only a third below normal levels – well above the lows during the nationwide state of emergency in April and May. And Apple Maps routing requests for driving, walking and public transport point to a further rise in mobility in July and early-August. Even if restrictions are tightened further, we still expect output to rebound by around 4.5% q/q this quarter following a roughly 8% q/q fall in Q2.