| 21 February 2024, Wednesday |

Japan to avoid recession, but Q2 growth forecasts cut sharply

Japan’s economy avoided slipping into recession in the first quarter of the year but an extension of coronavirus restrictions to curb the spread of infections has dented the growth outlook, a Reuters poll showed.

Just over a month before Tokyo is set to host the Olympic Games, Japan’s economy was seen growing an annualized 0.5 percent this quarter, less than a third of the 1.7 percent economists projected last month, according to the June 2-14 poll of 36 economists.

The gross domestic product of the third largest economy has dropped by an annualized 3.9 percent in January-March, the first contraction in three quarters.

About 85 percent of analysts polled expected the next policy move by the Bank of Japan, which is set to meet this week, to be an unwinding of stimulus, but 90 percent don’t expect that to happen until 2023 or later and the remaining 10 percent not until next year.

About two-thirds of economists, 23 of 36, expected the economy to grow this quarter, while the other 13 anticipated it would shrink, which would push it into recession – as marked by two straight quarters of contraction.

Japan was last in recession through the second quarter last year.

“Sales at stores are likely to fall, which is having the largest impact, even as the share of people … going out despite the emergency measures is rising,” said Masaaki Kanno, chief economist at Sony Financial Holdings.

The poll found Japan’s economy would grow at a much slower rate over the next two quarters than the United States, which is said to be on track to recover all the output it lost due to the health crisis this quarter.

Japan’s growth forecast is facing pressure from slowing economic activity and demand at home, both hit by the government’s move to extend the coronavirus emergency curbs in Tokyo and other major areas through June 20.

The economy is likely to expand around 4.8 percent on an annualized basis in the third quarter, below the 5.3 percent growth projected by economists last month and compared to a much higher annualized rate of 7.0 percent in the world’s top economy.

  • Reuters