MNI POLICY: Japan Govt: Difficult Predicting Services Recovery

Japan's underlying trend of private consumption has clearly changed in Q1 2021 due to the state of emergency and it's difficult to predict when face-to-face services will recover are unpredictable, a senior Cabinet Office official said Monday.

"Accommodation along with eating and drinking services are hardest hit by the state of emergency and how they will affect other spending or services cannot be predicted now," the official said.

Demand for household durable goods, automobiles and consumption were strong in Q4, with travel, eating and drinking services helped by the Go To Travel campaign and pent-up demand, he said.

The official also noted that exports and production are expected to be solid in Q1 on the back of solid demand for goods at home and overseas.

However, Q1 private consumption, particularly across the tourism and entertainment industries, remains weak, putting downward pressure on the economy overall.

Economists in the private-sector see Japan's economy contracting in Q1, with the average forecast an annualized -5.47%, according to the latest monthly ESP Survey of 36 economists by the Japan Center for Economic Research conducted between January 29-February 5.

Japan's economy grew for the second straight rise in the fourth quarter of 2020, rising 3.0% q/q, or an annualized 12.7%, boosted by private consumption and capital investment, preliminary GDP data released by the Cabinet Office Monday showed.

Japan's GDP 2020 contracted an annualized 4.8%, the first contraction since 2009 when the economy contracted -5.7% in the wake of the Great Financial Crisis.