Strong Q4 still on the cards

With daily cases surging to unprecedented levels and states of emergency extended to mid-September this week, there may not seem to be much light at the end of the tunnel for Japan’s economy. However, we’re cautiously optimistic that a strong recovery is just around the corner. Japan’s vaccine coverage is now not far off the rates seen in DMs where most domestic restrictions have already been “permanently” lifted. PM Suga outlined this week that he’s targeting getting 50% of the population fully vaccinated by the end of this month, and 60% by end-September. The vaccine rollout has progressed rapidly over the past couple of months and is broadly on track to meet those targets. The UK’s vaccination rate was only 53% when the last domestic restrictions were removed in England. Hospitalisations and deaths have remained contained in the UK despite daily cases peaking as high as 50,000-a-day. Even in Singapore – where virus containment measures have been far more heavy-handed than in Japan – domestic and border restrictions are being eased now that the vaccination rate has reached 70%. Japan should get to 70% by around late-October. Even if the Japanese government did wait until then to remove most domestic restrictions, it would still come in time for GDP to rebound strongly next quarter.