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Japan’s Economy: Monthly Outlook (Feb 2021)

Examining the economic impact of vaccine dissemination and spread of infection from mutant strain

Keiji Kanda

Akane Yamaguchi

Yutaro Suzuki

Taisei Watanabe


◆In light of the announcement of the Oct-Dec 2020 GDP 1st preliminary results, we have revised our economic outlook. We now see Japan’s real GDP at -5.0% in FY2020, with FY2021 at +3.8%, and FY2022 seen at +2.3%. FY2021 and FY2022 are expected to achieve growth somewhat on the high side due to progress in vaccination and outlook for improvements in the US economy.

◆The risk of the spread of COVID-19 infections is expected to remain great for the time being, and the possibility that the current state of emergency could be extended, or that a reissuance of the state of emergency could become unavoidable in the future, is not small. If a highly infectious mutant strain becomes prevalent in Japan, the death toll could increase by around 4,800 persons in comparison to our main scenario, and personal consumption could suffer a decline of around 24 tril yen in FY2021. Even if the mutant strain does not spread, there is still a possibility that a state of emergency could be declared again sometime in FY2021 if the pace of vaccination is slower than expected.

◆If a state of emergency is reissued in the future, it will be necessary to design a system for payment of subsidies for shortening business hours in consideration of the situation facing business operations. It would be desirable to fine-tune the amount of payment based on the size and type of the business establishment and the economic level of each region. Meanwhile, as a means of increasing the effectiveness of policy measures, supplying payment of subsidies in return for cooperation to the entertainment industry, which has an especially high risk of spreading infections, is also worth considering.

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