State of emergency extension, Olympic fifth wave?

While the fourth wave of coronavirus has broken, with hospital capacity still stretched the government will today extend the emergency declarations covering half of the economy until 20^th June. That supports our view that output won’t recover this quarter after a weak Q1. Further ahead, with the vaccine rollout accelerating we still expect a strong rebound from mid-Q3. But while the risks of importing dangerous virus variants during the Olympics are overblown, there certainly are downside risks from the more transmissible Indian variant which has already begun to spread in Japan. If it causes a fifth wave, then that would delay the economy’s recovery still further.