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Japan's full-year growth is expected to be lower than previously forecasted

Image: Reuters Berita 24 English - According to a Reuters poll of experts, Japan's economy will develop at a slower pace this quarter th...

Image: Reuters

Berita 24 English - According to a Reuters poll of experts, Japan's economy will develop at a slower pace this quarter than previously expected, despite forecasts for a robust comeback in consumption after displaying resilience in the three months through March.

The world's third-largest economy is in danger of being hampered by China's slowing economic growth and a rise in global raw material prices, both of which might harm Japan's core manufacturing sector, according to the poll.

However, the slower expansion still indicates that the economy will recover to pre-coronavirus pandemic levels by the end of this quarter, according to nearly 70% of survey respondents.

According to the median expectation of 36 economists in the May 18-27 poll, the economy would grow by 4.5 percent on an annualized basis this quarter, down from April's estimate of 5.1 percent growth.

Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute, said, "The pace at which the economy is recovering at home is modest."

"If raw material prices continue to climb, corporate profit margins might be adversely impacted, as there is limited pass-through of those costs into final prices."

According to the study, the most commonly stated concern posing a risk to Japan's economy in the second half of the year was a slowdown in Chinese economic growth.

China's harsh COVID-19 lockdowns have paralyzed commercial activity in major cities like Shanghai in recent weeks, disrupting supply chains and clouding the country's economic picture.

According to Japanese trade data released earlier this month, China's tough anti-pandemic efforts have already resulted in a drop in Japan's shipments to and from Asia's top economy in April.

Whether asked when the Japanese economy would rebound to pre-coronavirus levels by the end of 2019, 20 of 28 economists indicated this quarter, after the GDP shrank less than expected in January-March.

Five chose the following quarter, while two chose October-December and one chose April-June the following year.

Analysts cautioned, however, that even if the economy recovered quickly to end-2019 levels, it would likely fall short of the greater levels achieved earlier in the year before being hammered by a sales tax hike in October 2019.

"In July-September next year, the economy will most certainly exceed its pre-sales tax hike level," Tsunoda said.

"Soaring raw material costs," followed by "faster than projected U.S. monetary policy tightening," were the second and third most often identified risks for the second half of 2022, according to experts.

"Spread of new coronavirus strains," "semiconductor chip and components shortages," and "negative impact of domestic price rises on private consumption" were among the other options.

The biggest risk to the economy in the second half of the year, according to none of them, is a consistently weaker yen.

Core consumer prices, which exclude volatile fresh food costs, are expected to grow 2.0 percent this fiscal year and 0.9 percent in fiscal 2023, according to the survey.

The economy will expand by 2.3 percent this fiscal year, before slowing to 1.5 percent in fiscal 2023.

Analysts expected growth to be slightly weaker than predicted in last month's poll in both of the estimates.

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