The Japanese economy contracted more than expected in the third quarter of the year.
But economists in Tokyo are confident that the economy will gain significant momentum at the end of the year.
Last but not least, expectations are based on a large spending program that Prime Minister Fumio Kishida is currently having in preparation.
According to a report by the business newspaper Nikkei, the program is said to have a volume of more than 40 trillion yen (307 billion euros).
Patrick Welter
Correspondent for business and politics in Japan, based in Tokyo.
Follow I follow
In the period from July to October, the gross domestic product shrank by 0.8 percent compared to the previous quarter according to the seasonally and price effects.
The Japanese economy was hit twice in the quarter.
One-two punch in the third quarter
With the delta variant of the corona virus, the country experienced the fifth wave of contagion on a scale that is reminiscent of European pandemic conditions and which the Japanese did not know before.
Virus emergency conditions were in place in the Tokyo and Osaka metropolitan areas and several other prefectures.
This made consumers shy away from consumer spending, especially since the opening times of bars and restaurants and large department stores were limited.
The second hit hit the economy on the supply side with the shortage of semiconductors and other intermediate products in the wake of the pandemic.
There were no deliveries from Southeast Asia and the important automotive industry, among others, had to limit production.
The consequences can be seen not only in the fact that corporate investments fell by 3.8 percent in the third quarter compared to the previous quarter, but also in the decline in exports and imports compared to the same quarter of the previous year.
One consequence of the shortage of semiconductors and thus of new cars is that Japanese consumers spent 13.1 percent less on durable consumer goods in the third quarter.
More vaccinations, more consumption
With the end of the fifth virus wave and the end of most virus restrictions, recent economic indicators point to a pick-up in the final quarter of the year. The fact that more than 75 percent of Japanese are now fully vaccinated against the coronavirus contributes to the better prospects in retail. The bottlenecks in automobile production, among other things, are also decreasing and more cars are being sold again.
To support the economy in the coming year, the government of the new Prime Minister Kishida is preparing a major spending program.
It is already known that the government will pay Japanese people up to the age of 18 a one-off sum of 100,000 yen (770 euros) to stimulate consumption.
Households with higher incomes should not be entitled to this Corona child benefit.
As part of the economic stimulus program, nurses are also to receive more money.
Tax subsidies for companies that raise wages and financial subsidies for domestic tourism travel are also expected.
Japan is falling behind
In media reports, a financial volume of more than 40 trillion yen (307 billion euros) is given for the program. Experience has shown that only a significantly smaller part of this has a direct impact on expenditure. The program could be funded to a large extent by grants that the government failed to exhaust in the past corona year. Details on the economic stimulus plan are expected towards the end of this week.
With the contraction of economic output in the third quarter, Japan falls behind internationally among the large industrialized countries (G 7).
Last year, Japan left the primary shock from the corona pandemic behind it economically faster than European countries such as Germany or the United Kingdom because the island nation kept the virus more under control.
Now, however, Japanese economic output has shrunk for five of the past eight quarters.
The International Monetary Fund predicts that the Japanese gross domestic product will grow by 3.2 percent in the coming year, as weak as in any of the other G-7 countries.