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InvestmentsJapan's economy seen back in decline on COVID-19, supply issues

Japan’s economy seen back in decline on COVID-19, supply issues


© Reuters. FILE PHOTO: People cross a road in Tokyo March 18, 2015. . REUTERS/Yuya Shino

By Daniel Leussink

TOKYO (Reuters) – Japan’s economy seemingly contracted in the third quarter as curbs to cease a coronavirus resurgence and supply bottlenecks damage consumption and output, a Reuters ballot of economists confirmed on Thursday.

The forecast was in sharp distinction to the earlier month’s ballot that projected an enlargement in the quarter, underscoring the heavy toll components and chip shortages have taken on Japan’s producers.

But development was anticipated to rebound in the present quarter as consumption will get a lift from the Sept. 30 lifting of pandemic curbs, and auto output recovers from disruptions brought on by manufacturing facility shutdowns in Asia, the ballot confirmed.

The world’s third-largest economy shrank an annualised 0.8% in the third quarter, a reversal from a 0.8% enlargement projected final month, based on the median forecast of over 30 analysts.

The economy final noticed a contraction in the primary quarter, when it shrank an annualised 4.2%.

“Consumption is likely to have fallen, and car output, which has a huge impact, declined in July-September,” mentioned Naoki Murakami, senior economist at Asset Management One.

Preliminary third-quarter GDP information is because of be launched by the federal government on Nov. 15.

The economy is projected to publish a powerful 5.1% rebound this quarter as client exercise recovers after COVID-19 circumstances and deaths fell quickly, because of surging vaccinations that now cowl greater than 70% of the inhabitants.

Analysts count on fourth quarter development can even be helped by an easing of components supply disruptions throughout Asia – a key repair for the automobile business – although drag from the worldwide semiconductor chip scarcity was prone to pose a threat.

“The amount of people in the street shows consumption will recover in October and November. Travel and hotel reservations are also increasing,” mentioned Atsushi Takeda, chief economist at Itochu Economic Research Institute.

“Growth will likely turn positive in October-December, while the impact of the economic stimulus package of Prime Minister Fumio Kishida’s government should be seen after going into next year.”

The fourth-quarter forecast was higher than final month’s projection of 4.5% development, the Nov. 1-10 ballot confirmed.

Nearly 90% of economists polled thought the yen’s current weak spot towards its main friends has been principally useful for the economy, regardless of rises in uncooked materials and power costs globally.

The yen hit a close to four-year low towards the U.S. greenback and a greater than five-year low versus the British pound final month.

Overall, the yen’s depreciation is just not anticipated to right away damage Japan’s economy, though it might weaken the nation’s relative buying energy globally over the long-term, mentioned Hiroshi Ugai, chief Japan economist at JPMorgan (NYSE:) Securities.

The yen’s depreciation stimulates the economy for now, Ugai mentioned, however coupled with rising power prices, it might hit smaller corporations and households, although that price is probably going manageable.

Asked what yen degree versus the U.S. greenback would damage the economy, eight economist mentioned the harm would exceed the deserves when the yen falls beneath 130 to the greenback. Five selected a variety of 125-130 yen to the greenback, whereas eight picked 120-125 yen.

The subsequent hottest decide was “115-120 yen per dollar”, which was picked by three economists, whereas one analyst chosen “110-115 yen per dollar” and one other one selected “stronger than 110 yen per dollar”.

(For different tales from the Reuters international financial ballot:)

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