Japan's faster vaccine roll-out is good news for the economy

Tokyo

JAPAN'S vaccine drive was slow to get going, but it's on track now to beat the current US inoculation rate within weeks - good news for an economy that's endured one virus emergency after another.

If the current pace is sustained, Japan will have 51 per cent of its people fully vaccinated by Sept 12. As soon as Sunday, the country should hit the 40 per cent target that Prime Minister Yoshihide Suga set for month's end, meeting a key milestone ahead of schedule amid widespread criticism Japan hasn't done enough to rein in Covid-19 cases.

With vaccines being delivered more quickly than expected, an economic recovery seen accelerating mid-autumn could gather more momentum, say economists including Yuichi Kodama at Meiji Yasuda Research Institute. Much also depends on whether Japan can now bring a record wave of the virus to heel and scale back emergency guidelines.

"Vaccinations should have a big impact," Mr Kodama said. "Since case numbers should decline as more people get inoculated, we're likely to see various restrictions lifted. And once that happens we should see consumer spending rebound."

Japan managed to avoid a recession last quarter largely because shoppers shrugged off government warnings on the virus, but activity levels in Tokyo are still far lower than in New York and London, according to Apple Mobility Trends data.

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A decision on Tuesday to widen the latest state of emergency to more prefectures and keep it in place longer could cause consumers to retrench. Japan yesterday found about 20,000 new virus cases and recorded 47 more Covid-19 deaths, bringing the total to almost 15,500.

Mr Suga on Tuesday said he expects 60 per cent of the population to be fully vaccinated by the end of next month and plans to distribute enough doses to inoculate 80 per cent of eligible people by early October. The vast majority of Japanese seniors have already gotten all their shots, but the overall rate is only about 38 per cent.

Vaccination and growth rates are linked, which is a big reason the International Monetary Fund last month forecast 7 per cent growth for the United States and the United Kingdom, where more than half the people are fully vaccinated, compared with a 2.8 per cent expansion for Japan.

Bloomberg economist Yuki Masujima said: "Higher vaccination coverage is clearly better to slow the spread of virus cases, and full vaccination will probably reach 60 per cent, which has been a rough guideline for herd immunity, by end-September. Even so, due to the Delta variant and the lower coverage among younger generations who have most of the new infections, the hurdles for a recovery remain high."

Conditions could improve more quickly than expected if Japan can keep delivering around 1.4 million jabs a day, the average over the last month, according to Bloomberg calculations based on government figures for completed vaccinations.

"The key is to suppress the rate of contagion and keep the vaccine progress going," said economist Keiji Kanda at Daiwa Institute of Research. "We'd be able to get the service sector back on the recovery path."

The spread of the delta variant makes the recovery path harder, though, according to Haruka Sakamoto, a public health researcher at the University of Tokyo.

"The delta variant can cause infections even after two doses of vaccine," she said.

"The government's expert panel has been discussing the need for masks and social distancing even after 70 per cent of the population has been vaccinated."

Keeping the current pace also isn't a given, according to Kenji Shibuya, Director of the Soma COVID Vaccination Medical Center in Fukushima and a former senior scientist at the World Health Organization.

Japan is nearing an inoculation rate where other countries have started to hit a wall, supply bottlenecks could slow deliveries, and the drive could start to meet more resistance from young people, who are less scared of the virus.

"They don't think Covid is a serious disease," he said. "There should be some social incentive for them to get vaccinated." BLOOMBERG