Japan’s economic growth is expected to come an halt this quarter as fresh new COVID curbs and tightened supply chain comes as head wind for the economy, according to Reuters poll of economist.
The new forecasts is much lower than the robust expansion expected in January projections.
Meanwhile, among all other economic challenges global surge in energy cost backed Russia-Ukraine tensions will further increase input costs for the oil importing country.
Japan’s economy will grow an annualised 0.4% in the first quarter, down from a 4.5% expansion predicted last month, according to the median forecast of nearly 40 analysts in the poll, which was mostly carried out before Russia’s invasion of Ukraine.
The economy grew an annualised 5.4% in the final months of last year, keeping the seasonally-adjusted real gross domestic product (GDP), sized around 541 trillion yen ($4.7 trillion), below the pre-pandemic level of late 2019.
“Private consumption has to normalise for the economy to recover,” said Atsushi Takeda, chief economist at Itochu Economic Research Institute.
“Coronavirus trends continue to be the biggest risk for that not to happen.”
Economic growth is expected to pick up to an annualised 5.6% in the second quarter, which was better than last month’s projection of 3.4% growth, according to the poll.
The poll also found the economy would grow 2.9% in fiscal 2022, starting in April, after an expected 2.5% expansion this fiscal year.
Core consumer prices, which exclude volatile fresh food prices, will rise 1.2% next fiscal year after a projected flat reading this fiscal year, the poll showed.
“The impact won’t be serious if attention is paid to improvements of supply constraints while prices are kept in check by multiple rate rises,” said Harumi Taguchi, principal economist at IHS Markit.
“If prices rise more than expected and depress consumers’ purchasing power, there’s a risk of a vicious cycle of price hikes and wages that may lead to a recession in the United States.”
