TOKYO, May 6 (Reuters) - The Bank of Japan expects the national COVID-19 vaccination programme to spur an economic boost from households venturing out, armed with $183 billion in “forced savings” accumulated last year during pandemic-busting, stay-at-home policies.
The government is set to decide this week whether to extend a state of emergency in major areas to combat a resurgence in novel coronavirus infection, reinforcing broad expectations that any economic recovery will be slow and fragile.
Still, consumption may rebound relatively quickly once vaccines have been distributed widely, as households tap 20 trillion yen ($183 billion) in money they were “forced” to save when measures adopted to stop the spread of the coronavirus, such as early store closing, deprived them of opportunities to spend, showed a Bank of Japan estimate released last week.
The amount is roughly 7% of Japan’s disposable income with over half likely held by middle- and high-income households, which spend large amounts on services, the central bank said.
“Until effective vaccines become widespread, the spread of COVID-19 may push down private consumption through public health measures and households’ self-restraint behaviour,” it said.
But forced saving may come to a sudden end as vaccinations become widespread, the BOJ said.
“From a somewhat long-term perspective, it is ... necessary to take into account the possibility that private consumption will see a larger-than-expected rebound as COVID-19 subsides.”
The estimate served as a basis for the bank’s quarterly forecasts released last week, which projected a recovery in the world’s third-largest economy driven by robust exports and a gradual rebound in consumption.
The bank said its forecasts are based on the assumption the pandemic will subside in Japan sometime next year.
$1 = 109.3400 yen Reporting by Leika Kihara; Editing by Christopher Cushing
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