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Japan’s surprising 2 digit GDP growth in the pandemic

Post world-war 2, the Japanese currency Yen lost it’s value. Under the Bretton wood system, the country’s currency had to be fixed at 360 ¥ per 1 dollar. From then on Yen has appreciated and today it is approx 109 ¥ for 1 USD. This remarkable performance is coveted globally.  Yen also posses a niche title – “Reserve Currency” which means it is globally accepted for transactions and is held for foreign exchange reserve purposes.  

In the covid-era, Japan has outdone itself in terms of striking back 10 times harder, when it is at its weakest. From 2020 to 2021, when globally every country’s GDP was washed away, Japan managed to grow double digit GDP number in quarter 3. In quarter 2 when the world was at a complete lock down, Japan’s GDP contracted by whopping 28.8 percent at an annualized rate. However in quarter 3 it managed to bounce back to 21.4 percent.

Reasons accounting for the surge in quarter 3 GDP results-

Land of the rising Sun, has managed to not only survive but also live without any significant natural resource. The economy of the country mostly relies on exports and imports. It is known to be the most innovative country in the world. Primarily, major source of wealth creation comes from its automobile, services and robotics sector. It is the 3^rd biggest automobile producing centre in the world. Japan which is birthplace of Toyota is currently the world largest car maker, and the Japanese car makers Nissan, Honda, Suzuki, and Mazda also count for some of the largest car makers in the world. Japan’s service sector accounts for about three-quarters of its total economic output. Japan also maintains one of the world’s largest fishing fleets and accounts for nearly 15% of the global catch. With the weaker Yen, Naturally it is a hot tourist spot for western countries.

Despite of being highly dependent on imports for raw materials and energy needs; it has done significantly well in industrial sector. The country dominates in biotechnology, nano-technology,  and renewable energy sectors. Japan is home to several of the world’s largest manufacturers of electronic products, which is why the country’s industrial sector is often associated with technological sophistication. It is 2nd largest ship manufacturer in the world.

In midst of 2020, when the world slowly opened up for business, Japan’s GDP got a kick-start boom due to exports. But in 4^th quarter, the GDP growth has slowed down to 12.7 percent. This may probably be the result of low domestic consumption. With high unemployment rate and bankruptcies, the road towards rapid recovery in economy seems unlikely. However, some economists are optimistic for the quarter 2 result of 2021, owing to further rise in external demands. This will result in increased output from factories.

Road to rapid recovery

Incase if the country wishes to revive its fragile economy which is completely dependent on imports and exports.  It must search for ways to reduce debts that were taken on after the tragic incident of tsunami and earthquake in the year 2011.

To emerge from stagflation, the country needs to resuscitate its dying population. This is an era of explosive growth in global trade, yet Japan’s share of global exports has fallen from 7 percent in 2000 to 4 percent in 2013. It needs to counter the problem of its aging population.

Written by- Priyanshi Shah

Literary sources:-

Aljazeera

Japantimes

Statista