Japan cuts economic growth projection as consumer spending hurt by extended state of emergency

The government of Japan slashed its economic growth projection in February as the country faces an extended state of emergency to curb the spread of the coronavirus, causing further blows to consumer spending.

Economists suggest Japan’s economy will contract in the current quarter as reinstated coronavirus restrictions in Tokyo and some prefectures weigh on business activity and household spending.

The government cut its estimates for consumer spending for 3 months in a row, citing an indication of weakening performance as people lessened outdoor spending activities. However, it increased its capital spending projection for the second consecutive month as the demand for core machinery showed signs of improvement.

Japanese stocks soared to a 30-year high this week as progressing inoculation programs bolstered hopes for a global economic recovery.

The government projects a 4.0% economic growth in the next fiscal year starting in April, following a 5.2% decline in the current fiscal year to March.