Photo/Illutration Hakata Hankyu Department Store in Fukuoka’s Hakata Ward shows signs at its entrance to notify customers that it could limit the number of entrants to its food floor. (Soichiro Yamamoto)

The latest surge in new coronavirus cases, which experts have labeled as the “largest crisis” in this pandemic, is casting a pall of uncertainty over Japan’s economic outlook.

To ensure the nation’s medium- to long-term economic recovery, it is vital to take strong policy actions to slow new cases while revving up the nationwide vaccination campaign.

The government’s latest economic growth data, released on Aug. 16, show Japan’s seasonally adjusted gross domestic product, or GDP, the sum of the value of a nation’s products and services, edged up 0.3 percent in the April-June quarter after shrinking 1.0 percent in the preceding three months.

In the first half of the year as a whole, however, the nation’s economy remained flat. Economic recovery has lost steam after a notable rebound in the last six months of last year.

Exports and capital investment are relatively strong thanks to the recovery of other major economies. A number of large manufacturers are showing higher earnings performances than levels before the pandemic.

In contrast, consumer spending has been struggling to pick up as a state of emergency has been issued intermittently. The job situation has improved from the dismal picture last year but remains worse than it was in 2019.

What will things look like down the road?

Assuming that policy support will keep propping up the domestic economy and that pent-up demand will kick in sooner or later, economists and policymakers, by and large, still believe the Japanese economy will return to an upward trajectory when clear signs of the pandemic winding down emerge.

At the moment, however, the effectiveness of vaccinations and the high transmissibility of the Delta variant, which is ravaging the nation, is in a tug of war. There is no ruling out the possibility that the economy may remain in the doldrums for longer or even start sinking again.

As the government has decided to expand the scope of areas subject to a state of emergency and extend the periods of the measure, consumer spending, if nothing else, will remain weak for the time being.

The hospitality industry, in particular the restaurant sector, continues bearing the brunt of the economic damage from the health crisis. Many companies and workers in the sector are already in dire straits after a prolong period of business restrictions in response to requests from authorities.

To make matters worse, the current fifth wave of infections requires tighter restrictions to reduce social contacts. That translates into an increased burden on the sector at least in the short term. Easing the restrictions to avoid the damage, however, would only delay recovery.

To make all-out efforts to ensure that the fifth wave will come to an end as soon as possible, all the resources available in the Japanese economy should be harnessed to rescue hard-hit industries through sufficient and quick policy support.

In the current Delta surge, infections are also spreading fast in the working-age population, the backbone of the economy. Some retail stores have been forced to close due to a manpower shortage as their workers have caught the virus, even though such business casualties are still limited in number.

The spread of infections at workplaces must be prevented to protect the health of workers and maintain key social functions.

There has been some progress in workplace vaccinations even though limited in scope. The rollout has been delayed at many workplaces due to confusion caused by misestimation of demand by the government.

Many companies are having a hard time being sufficiently prepared to conduct a mass inoculation because of such factors as types of business and scales of operation.

Major companies should try to ensure that not only their employees but also those of their smaller business partners and subcontractors will be vaccinated as soon as possible as part of their efforts to protect the health of the workforce and curb infections.

--The Asahi Shimbun, Aug. 19

Related News