Wider COVID-19 curbs heighten double-dip recession risk in Japan

Jan 11, 2021 | News On Japan

Jan 11, 2021 (Japan Today) - Japan is considering extending a state of emergency from the Tokyo metropolitan area to other regions as novel coronavirus cases increase but that could raise the risk of a double-dip recession for the world's third-largest economy.

Prime Minister Yoshihide Suga conceded that the measures that took effect in the capital region on Friday might also be needed in other parts of the country as infections spread.

The government has resisted calls from some experts for wider curbs beyond those imposed in Tokyo because of the economic pain they would cause.

Analysts and officials have warned that the limited, one-month state of emergency targeting Tokyo and neighboring prefectures could lead to a contraction in economic growth for the current quarter.

"There's no doubt it will affect January-March growth," Finance Minister Taro Aso told reporters, when asked about the economic impact.

Osaka, Kyoto and Hyogo prefectures plan to ask the government to impose a state of emergency.

"We'll work closely with the regions and respond as needed," Suga told reporters earlier when asked about the requests from the prefectures.

Many policymakers say the hit to growth this time will not be as severe as last year's state of emergency, which hurt retailers nationwide and forced many manufacturers to suspend production.

Robust overseas demand and the boost to growth from massive government stimulus will offset some of the pain, analysts say.

But prospects of a broader and longer state of emergency cloud the outlook for the economy, which is still emerging from a record slump in April-June last year.

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