The long and winding road back to normality

The recent spike in COVID-19 cases in Tokyo linked to nightlife establishments in Shinjuku underlines just how slow the road back to normality could be. Renewed outbreaks are likely to prevent a straightforward and swift economic recovery. Indeed, many intercity rail travellers were still able to have a whole carriage to themselves in the first 17 days of June. But looking further ahead, Japan should bounce back more strongly from the current crisis than other developed economies. Japanese corporate balance sheets are healthier than those in the West and the labour market is also holding up better than elsewhere. And the significant support to workers and businesses provided by the Ministry of Finance and the Bank of Japan has reduced the chances of the virus inflicting lasting pain on the economy. Finally, daily new infections in Japan are generally much lower than across most economies reopening in Europe and North America, which makes a full blown “second wave” much less likely.