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Japan Sees Continued Economic Recovery Despite Omicron Spread

Despite surging infection rates, Japan said it still sees the economy picking up as the severe pandemic conditions gradually ease.

Japan Sees Continued Economic Recovery Despite Omicron Spread
Pedestrians cross an intersection, seen from the Shibuya Sky observation deck. (Photographer: Kiyoshi Ota/Bloomberg)

Japan’s government kept its monthly economic assessment unchanged in January, sticking to the view that a recovery is continuing even as the omicron variant of the coronavirus spreads across the country.

Despite surging infection rates in recent days, the Cabinet Office said it still sees the economy picking up as the severe conditions caused by the pandemic gradually ease. In terms of specific components, the government raised its view of industrial production, citing signs of improvement in the country’s key factory sector.

While the report shows the government so far withholding judgment on how the omicron variant is impacting the economy, restrictions to curb its spread could damp the recovery’s momentum, at least in the short term.

The nationwide daily case count is closing in on the record from August last year, when Japan’s delta wave peaked. Hospitalizations have yet to rise too much, but Japan reported more than 25,000 new cases each day over the weekend, from just double-digit cases a month ago.  

Several smaller prefectures have already introduced tougher rules, with Tokyo and ten others reportedly set to tighten later this week. 

Economists expect a report due next month to show Japan returned to growth in the final quarter of 2021, fueled by a rebound in consumer spending that came after summer restrictions were lifted. So far, analysts see the recovery continuing this quarter.

©2022 Bloomberg L.P.