Green shoots after Golden Week holiday

Economic activity remained severely damaged by coronavirus containment efforts in early May. In particular, the retail sector usually receives a substantial boost during Golden Week but the number of restaurant goers was extremely low throughout this year’s holiday. However, we suspect the economy has now reached a trough. With the spread of the virus now seemingly under control, activity is set to rebound. The government yesterday lifted the state of emergency for 39 of Japan’s 47 prefectures. That includes prefectures previously flagged as critical by the government such as Aichi and Fukuoka. Osaka will also retract calls for businesses to close from tomorrow despite remaining under the state of emergency. As such, the economy should recover gradually. We are forecasting a 7% q/q rebound in GDP in Q3, topped up by 2.5% q/q growth in Q4.