Government data on Monday showed that the Japanese economy emerged from recession in the third quarter, growing 5.0% better than expected, as signs of recovery began to emerge after a record contraction.
Rising domestic demand, as well as exports, helped drive growth quarterly after the coronavirus epidemic and an increase in consumption tax brought the economy down earlier in the year.
The positive numbers come after three-quarters of contraction in the world’s third-largest economy, with revised data showing that the economy contracted by 8.2% in the second quarter, more than previous expectations of 7.9%.
It was the worst number for Japan since comparable data became available in 1980, surpassing even the brutal impact of the 2008 global financial crisis.
Growth in the third quarter will be good news for the Japanese government, which has avoided the strict lockdown measures seen in some other countries as it tries to balance preventing the spread of the Coronavirus and protecting the economy.
The results also beat economists’ expectations for 4.4% growth, and analysts said the recovery is likely to continue into the fourth quarter.
“Between July and September, economic activity in Japan saw a return to normal to some extent as the government lifted the state of emergency in the country,” said Naoya Ushikubo, chief economist at the Sumitomo Mitsui Trust.
“Looking to the future, we believe that the GDP numbers in the next quarter will still show signs of recovery, albeit at a slower pace,” Ushikubo said in a note before the official release of the data.
“The pent-up demand should slow, mainly due to the second waves of Covid-19 abroad,” he added.
Japan was already suffering from the sluggish economy and the impact of the consumption tax hike that was implemented last year before the outbreak.
The coronavirus outbreak was smaller compared to some of the worst-affected countries, with infections approaching 120,000 and just under 2,000 deaths.