TOKYO, Nov. 11 (Reuters) – Japan’s economy likely contracted in the third quarter as reins in the coronavirus resurgence and supply bottlenecks hurt consumption and manufacturing, a Reuters poll of economists showed on Thursday.
The forecast contrasted sharply with last month’s poll that forecast an expansion in the quarter, underlining heavy toll parts and chip shortages among Japanese manufacturers.
But growth was expected to recover in the current quarter as consumption gets a boost from the lifting of pandemic restrictions on Sept. 30 and auto output recovers from disruptions caused by factory closures in Asia, the poll found.
The world’s third-largest economy shrank 0.8% year-on-year in the third quarter, reversing from 0.8% growth forecast last month, according to the median forecast of more than 30 analysts.
The economy last contracted in the first quarter, when it shrank 4.2% year on year.
“Consumption has likely fallen and auto production, which has a huge impact, declined in July-September,” said Naoki Murakami, senior economist at Asset Management One.
Preliminary GDP data for the third quarter will be released by the government on Nov. 15.
The economy is expected to see a strong 5.1% recovery this quarter as consumer activity picks up after COVID-19 cases and deaths declined rapidly, thanks to rising vaccination rates that now cover more than 70% of the population.
Analysts expect growth in the fourth quarter will also be helped by an easing of disruptions in parts supply in Asia – a key solution for the auto industry – although the drag on the global semiconductor chip shortage would likely pose a risk .
“The number of people on the streets shows that consumption will recover in October and November. Travel and hotel reservations are also increasing,” said Atsushi Takeda, chief economist at the Itochu Economic Research Institute.
“Growth is likely to turn positive in October-December, while the impact of the economic stimulus package from Prime Minister Fumio Kishida’s government will not be visible until next year.”
The fourth quarter forecast beat last month’s projection of 4.5% growth, the Nov. 1-10 poll showed.
Nearly 90% of economists surveyed believed that the yen’s recent weakness against its major competitors was mainly beneficial to the economy, despite rising commodity and energy prices worldwide.
The yen reached a nearly four-year low against the US dollar last month and a more than five-year low against the British pound.
In general, the depreciation of the yen is not expected to immediately hurt the Japanese economy, although in the long run it could weaken the country’s relative purchasing power globally, said Hiroshi Ugai, Japan’s chief economist at JPMorgan Securities.
The yen’s depreciation is boosting the economy for now, Ugai said, but combined with rising energy costs, it could hit smaller businesses and households, although those costs are likely to be manageable.
When asked what level of the yen against the US dollar would hurt the economy, eight economists said the damage would be greater than if the yen fell below 130 for the dollar. Five chose a range of 125-130 yen to the dollar, while eight chose 120-125 yen.
The next most popular choice was “115-120 yen per dollar,” which was chosen by three economists, while one analyst chose “110-115 yen per dollar” and another “stronger than 110 yen per dollar.”
(For other stories from Reuters’ global economic poll: )
Reporting by Daniel Leussink; Poll by Vivek Mishra, Devayani Sathyan and Md Manzer Hussain; Editing by Sam Holmes
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