Japan’s economy continued to wobble in the third quarter of 2021, tipping back into contraction, as the country struggled to find its economic footing in the face of coronavirus restrictions and a supply chain crunch that hit its biggest manufacturers.
In the July-to-September period, the country’s economy, the third largest after the United States and China, shrank by an annualized rate of 3 percent, government data showed on Monday. The result, a quarterly drop of 0.8 percent, followed a slight expansion in the previous three-month period, when economic output grew at a revised annualized rate of 1.5 percent, or a quarterly rate of 0.4 percent.
But brighter days may be ahead, at least in the near term.
Japan now has one of the highest vaccination rates among major nations, and it has lifted virtually all restrictions on its economy as its virus caseload has fallen in recent weeks to one of the lowest levels in the world.
Seventy-five percent of the country is fully vaccinated. And coronavirus case counts have hovered in the low hundreds since mid-October, a decline of about 99 percent since their August peak, heralding the return of long-suppressed consumer spending.
back foot because of a clunky vaccine rollout that left it far behind its peer countries.
By midsummer, it was in the midst of its toughest battle yet with the virus. The Delta variant caused cases to surge just as Tokyo prepared to kick off the Summer Olympics. Sponsors rolled back advertising campaigns, and tourists stayed home. The Games, which were conducted without spectators, failed to deliver the economic boost that had been promised when the country was chosen as host.
As the virus spread, Japan entered a new state of emergency. Restaurants and bars closed early and travel dried up, with many people deciding to stay home rather than brave record-high case counts.
At the same time, semiconductor shortages battered the country’s automakers, forcing many to drastically cut production. In September, the top eight Japanese manufacturers made about half as many cars as they had at the same time in the previous year.
“There was an enormous drop in production, and even if people wanted to buy cars, they couldn’t,” Ms. Kobayashi said.
Since the country ended its state of emergency last month, however, foot traffic has nearly returned to prepandemic levels, said Tomohiko Kozawa, a researcher at the Japan Research Institute.
“There’s a risk that infections could begin to spread again, but for the moment, the outlook points to recovery,” he said, adding that “we can expect high growth” in domestic consumption in the coming months.