Japan’s third-quarter FY22 growth weakens as global economy falters

By on July 19, 2022 0

TOKYO, July 19 (Reuters) – Japan’s economy is set to grow at a slower-than-expected pace throughout the financial year, a Reuters poll has found, as growing risks of a global economic slowdown and supply difficulties plague Japanese exporters.

Manufacturers in the world’s third-largest economy are sensitive to the bleaker growth outlook in major trading partners such as the United States and China, which is fueling fears of recession and stagflation around the world. Read more

Analysts, however, still expected Japan’s growth to remain positive through the year to next March, the poll found, thanks to an expected recovery in consumption, which accounts for more than half of gross domestic product. from the country.

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The economy is expected to grow 3.1% annualized this quarter, according to the median forecast of 36 economists in the July 4-15 poll, lower than the 3.5% estimated in a June survey.

The poll’s economists also slightly lowered growth estimates for the October-December and January-March quarters, while cutting those for the last quarter even further, to 3.2% from 4.1% in June.

“The main factor driving the overall downgrade is growing sentiment of a slowing US economy,” said Harumi Taguchi, senior economist at S&P Global Market Intelligence.

China’s zero coronavirus policy could also prolong supply bottlenecks for Japanese exporters, she said.

Export-oriented Japanese manufacturers have been hit hard by a relentless rise in commodity prices after Russia’s invasion of Ukraine and COVID-19 lockdown measures at Chinese factories this year. Read more

Survey analysts expected Japan’s industrial production to contract 3.8% in April-June from a year earlier, to be followed by a meager 2.2% recovery in production in July-September.

Domestically, the economy should continue to benefit from a pickup in household spending for pent-up demand for services such as travel after coronavirus restrictions were lifted in March.

“Rising prices do not appear to be depressing private consumption at the moment, although the impact could be larger if it persists,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

A recent increase in coronavirus cases has added uncertainties to the consumer outlook, he said.

Economists’ median estimate in the poll showed Japan’s annual core consumer inflation likely to hit 2.4% in October-December, then in line with the Bank’s 2.0% target. from Japan early next year.

But nearly 90% of analysts said any unwinding of the BOJ’s ultra-easy policy won’t happen until 2023 or later.

PRIORITIZE ENERGY

Asked what areas the government should focus on after the July 10 upper house election that resulted in a convincing victory for Prime Minister Fumio Kishida’s ruling coalition, 19 of 27 economists, or 70 %, said the energy policy.

Japan’s prime minister said on Thursday he had asked the industry minister to have up to nine nuclear reactors operational in winter, when energy consumption increases. Read more

Twelve analysts selected “foreign/security policy” in the two-choice question, while six selected “social security” and “price hikes.”

Five economists chose “COVID-19 pandemic”, two said “wage increases”, two chose “tax reform” and one said “growth strategy”.

Responding to a question about what would be the most likely impact on Japan’s economy if a heat wave persisted through the summer, 12 of 27 economists said it would be negative for both consumption and production, with some citing increased risks of power shortages.

Another eight said consumption would be boosted by the scorching heat, but would be negative for production, while five said it would be positive for consumption as well as production.

“A lingering heat wave will support consumer spending in tourism and hospitality as well as more powerful and energy-efficient air conditioners,” said Chiyuki Takamatsu, chief economist at Fukoku Mutual Life Insurance.

(For more articles in the Reuters Long-Term Global Economic Prospects Polls Brief:)

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Reporting by Kantaro Komiya; Poll by Arsh Mogre and Anant Chandak; Editing by Daniel Leussink and Jonathan Cable

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