Japan’s Q1 growth forecast cut due to Omicron’s impact on consumption: Reuters poll

The Japanese national flag flies in front of the construction site of a commercial building in Tokyo, Japan, February 17, 2022. REUTERS/Kim Kyung-Hoon/Files

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TOKYO, Feb 28 (Reuters) – Japan’s economic growth is likely to stall this quarter as coronavirus curbs and supply disruptions threaten to derail the country’s economic recovery, a Reuters poll showed on Monday. economists.

The forecast was well below the robust expansion expected in the January projection, a sign of the heavy damage that chip and parts shortages and the infectious variant of Omicron are inflicting on the world’s third-largest economy.

Another setback to the economy could prompt the government to do more to offset a spike in global energy prices and support households ahead of upper house elections due by summer.

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Japan’s economy will grow 0.4% annualized in the first quarter, compared to a 4.5% expansion expected last month, according to median forecasts from nearly 40 analysts in the poll, which was mostly conducted ahead of the invasion of Ukraine by Russia.

Reuters Charts

The economy grew by an annualized 5.4% in the final months of last year, keeping the seasonally adjusted real gross domestic product (GDP) of around 541 trillion yen (4.7 trillion dollars), below the pre-pandemic level of late 2019.

The economic outlook has become more uncertain for Japan due to the Russia-Ukraine crisis and soaring energy and commodity prices, compounded by a weaker yen.

The Japanese currency hit a nearly five-year low against the US dollar in January and has since hovered near that level.

In a February 15-25 poll, the biggest risk to the country’s economy over the coming year is expected to come from the emergence of new coronavirus variants, followed by a faster-than-expected tightening of the coronavirus. US monetary policy and supply chain disruptions.

“Private consumption needs to normalize for the economy to recover,” said Atsushi Takeda, chief economist at the Itochu Institute of Economic Research.

“Coronavirus trends continue to be the biggest risk of this not happening.”

Economic growth is expected to pick up to 5.6% annualized in the second quarter, better than last month’s projection of 3.4% growth, according to the survey.

The poll also found the economy would expand 2.9% in fiscal 2022, starting in April, after an expected 2.5% expansion in that fiscal year.

Core consumer prices, which exclude volatile fresh food prices, will rise 1.2% in the next fiscal year after a flat reading expected for this fiscal year, according to the survey.

Three-quarters of the 33 analysts who responded to a question about rising U.S. interest rates said several hikes by the U.S. Federal Reserve over the next 12 months would not have a serious impact on the economy. Japanese economy.

The remaining quarter, or eight respondents, said the effect of multiple U.S. rate hikes on the economy would be severe, while none expected it to be very severe.

“The impact won’t be severe if one pays attention to improvements in supply constraints as prices are kept under control by multiple rate hikes,” said Harumi Taguchi, senior economist at IHS Markit.

“If prices rise more than expected and depress consumers’ purchasing power, there is a risk of a vicious cycle of price and wage increases that could lead to a recession in the United States.”

(For other Reuters Global Economic Survey articles: read more)

($1 = 115.2200 yen)

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Additional reporting by Kantaro Komiya; Poll by Md Manzer Hussain in Bangalore; Editing by Jacqueline Wong

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