Economy to stagnate in first half of the year

The states of emergency set to begin in four major prefectures on Sunday will knock back Japan’s economic recovery and should mean that output stagnates across the first half of 2021. While the declarations are only scheduled to last just over two weeks, they’re expected to include widespread business closure orders. Off the back of that, we’ve revised down our 2021 growth forecast. However, we’ve raised 2022 growth from 2.4% to 2.7%. That’s because we still expect vaccination to allow a full rebound in domestic activity by the end of the year. Indeed, the vaccine rollout is finally accelerating and should gather much more pace over the coming weeks.