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Japan's economy rebounds from record slump

Leika Kihara and Tetsushi Kajimoto
·2-min read

Japan's economy grew an annualised 21.4 per cent in the third quarter, rebounding sharply from a record postwar slump and in a sign of gradual emergence from the coronavirus pandemic.

Still, many analysts expect any further rebound in the economy to be moderate as persistent weakness in consumption and a resurgence in infections at home and abroad clouds the outlook.

The expansion in gross domestic product compared with a median market forecast for an 18.9 per cent gain, Cabinet Office data issued on Monday showed.

It marked the first increase in four quarters and followed a 28.8 per cent plunge in April-June.

On a quarter-on-quarter basis, the economy grew 5.0 per cent, faster than forecasts of 4.4 per cent and pulling out of recession.

Private consumption, which makes up more than half of the economy, rose 4.7 per cent in July-September from the previous quarter, rebounding from a plunge in April-June blamed on lockdown measures aimed at preventing the spread of the virus.

External demand - or exports minus imports - added 2.9 per cent points to GDP growth thanks to a rebound in overseas demand that pushed up exports by 7.0 per cent.

But capital expenditure fell 3.4 per cent, shrinking for a second straight quarter, suggesting uncertainty over the pandemic's fallout is weighing on business sentiment.

Japan has so far announced two stimulus packages worth a combined $US2.2 ($A3.0) trillion to ease the pain from the health crisis, including cash payments to households and small business loans.

Prime Minister Yoshihide Suga has instructed his cabinet to come up with another package as the pandemic's damage persists.

Despite some signs of improvement in recent months, analysts expect the world's third-largest economy to shrink 5.6 per cent in the current fiscal year ending in March 2021.