COVID Unlikely To Have Scarring Effects On Japan Economy

The International Monetary Fund (IMF) has stated that the COVID pandemic is unlikely to have "significant scarring effects" on Japan due to Tokyo’s substantial fiscal and monetary support, but the world's third-largest economy needs to craft post-pandemic policies for sustainable growth as its population shrinks.

Photo Insert: In its preliminary findings following the consultations, the IMF estimated that Japan's growth will accelerate to 3.3 percent in 2022 following a 1.6 percent rise in 2021.

The IMF also said in an assessment of Japan's economic developments and policies that there is still "room" to raise revenues such as through consumption tax rate hikes, with the country's tax revenues as a percentage of gross domestic product relatively low among the Group of Seven (G7) industrialized nations, Miya Tanaka reported for Kyodo News.

The Washington-based institution holds regular consultations with member countries, usually annually. The pandemic, however, has disrupted the schedule, making the latest report on Japan the first since February 2020.

In its preliminary findings following the consultations, the IMF estimated that Japan's growth will accelerate to 3.3 percent in 2022 following a 1.6 percent rise in 2021, on the back of continued strong fiscal support, a high COVID-19 vaccination rate, and the easing of pandemic-related global supply constraints.

The economy suffered a 4.5 percent contraction in 2020.

While the current surge of the highly transmissible Omicron variant of the coronavirus in Japan could slow growth momentum in the first quarter of 2022, a "strong rebound" is expected in the second quarter as the wave dissipates, IMF said.

But it also warned of the "unusual uncertainty around the pandemic," touching on a possible delay to the recovery of services consumption if strict containment measures become necessary as a result of Omicron cases overwhelming the health system.

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