Effective measures needed to shore up economy amid pandemic uncertainty

Coutesy of the National Institute of Infectious Diseases
An election micrograph of the omicron variant of the novel coronavirus

The economy is in a state of flux, and the renewed spread of the novel coronavirus has increased uncertainty about the future. The government should consider additional effective measures to shore up the economy.

The preliminary report on real gross domestic product for the April-June quarter of 2021 indicated an annualized 1.3% increase from the previous quarter. Although the growth rate was small, it was the first positive growth in two quarters.

Exports rose 2.9% from the previous quarter due to economic recovery in the United States, China and other countries. Corporate capital investment was robust, increasing 1.7%.

In addition to moves to resume investments that had been postponed due to the coronavirus pandemic, there is a strong appetite among businesses for investment in the fields of digitization and decarbonization, according to the report. Business performance, particularly in the manufacturing industry, is on a recovery track. It is hoped that companies with surplus funds will make positive investments in facilities and human resources.

However, there is no shortage of concern regarding the future. Fears are mounting over the risk of an economic slowdown in Europe, the United States and China due to the renewed expansion of coronavirus infections. The rapid increase in the number of people infected with the virus in Southeast Asia, where Japanese manufacturers have production bases, and a worldwide shortage of semiconductors are also worrisome.

Companies should remain vigilant against these risks.

Personal consumption, which accounts for more than half of the GDP, grew by a meager 0.8% mainly due to the declaration of a state of emergency. In addition, since July, the number of people infected with the delta coronavirus variant has been increasing rapidly, with infection clusters confirmed among employees at department stores and elsewhere.

It is important for businesses that are at the forefront of consumer spending to check again whether the infection control measures they have taken so far are functioning sufficiently. It is hoped that the government will fully support such efforts.

Strengthening measures further to prevent the spread of infections will inevitably have a negative impact on the economy. It is essential to help businesses and households in need.

Isn’t it necessary to take additional economic measures with the prolonged state of emergency in mind? Some members of the ruling parties are reportedly considering providing benefits to low-income earners, among others.

However, the government has so far focused on budgetary scale of its financial assistance measures. For that reason, it has not met the demand for prompt delivery of benefits to the public. The fact that ¥30 trillion has been carried over from the fiscal 2020 budget is proof of this.

If new support measures are to be implemented, they must be accompanied by steps to simplify procedures, among other things. Needless to say, it is essential to eliminate wasteful spending that takes advantage of coronavirus measures.

Vaccinations are also an urgent task to be expedited. Economic growth rates in the United States, Europe and China, where vaccinations have advanced rapidly, far exceeded the rate of Japan. Strategic measures such as using vaccination certificates and negative PCR (polymerase chain reaction) test results to stimulate consumption will be important.

— The original Japanese article appeared in The Yomiuri Shimbun on Aug. 18, 2021.