A poll of economists showed on Thursday that the economy of Japan could contracted in the third quarter as the curbs to stop a coronavirus resurgence and supply bottlenecks hurt consumption and output.
The forecast was sharply contrasting to the previous month's poll that projected an expansion in the quarter, underscoring the heavy toll parts and chip shortages taken on Japan's manufacturers.
The poll shows that growth will rebound in the current quarter as consumption gets a boost as the Sept. 30 lifting of the pandemic curbs and auto output recovers from disruptions caused by factory shutdowns in Asia.
The median forecast of over 30 analysts shows that the world's third-largest economy increased by 0.6% in the third quarter after it went down a 0.8% expansion last month.
The economy experienced a contraction in the first quarter when it struck an annualised 4.2%.
car output, which has a huge impact, fell in July-September, according to Naoki Murakami, a senior economist at Asset Management One.
The third quarter GDP data is expected to be released by the government on November 15.
The economy is projected to have a strong 5.1% rebound this quarter, as consumer activity recovers after COVID-19 cases and deaths fell quickly, as a result of surging vaccinations that now cover more than 70% of the population.
Analysts think that fourth quarter growth will be helped by an easing of parts supply disruptions across Asia - a key fix for the car industry - though it is likely to cause a risk of drag from the global semiconductor chip shortage.
In October and November, amount of people in the street shows that consumption will recover in October and November. Atsushi takeda, chief economist at Itochu Economic Research Institute, said travel and hotel reservations are increasing.
The economic package of Prime Minister Fumio Kishida's government will be seen after going into next year, while growth will likely turn positive in October-December. The November 1 - 10 survey showed that the fourth quarter forecast was better than last month's projection of 4.5% growth.
Despite the rising price of raw material and energy prices globally, economists polled mostly think that the weakness of the yen has been mostly positive for the economy, despite rising in the number of economists who polled it's recent weakness against its major peers.
Last month, the pound hit a four-year low against the U.S. dollar and a more than five-year low against the British pound.
Overall, the yen"s depreciation is not expected to immediately hurt Japan"s economy, although it could weaken the country"s relative purchasing power globally over the long-term, said Hiroshi Ugai, chief Japan economist at JPMorgan Securities.
It could hit smaller firms and households because of the rising energy costs, but it could hit smaller firms and households, though that cost is likely manageable.
The damage would be higher than expected if the pound falls below 130 to the dollar, according to eight economists, when the pound falls below 130 to the dollar. Five chose a range of 125 - 130 yen to the dollar, while eight picked 120 - 125 yen.
The next most popular pick was 115 - 120 won per dollar which was picked by three economists, while one analyst chosen 110 - 115 yen per dollar and another chosen stronger than 110 yen per dollar