TOKYO- Japan’s economy likely rebounded in April-June from contraction in the previous quarter thanks to solid consumer spending in face-to-face services no longer hindered by coronavirus curbs, a Reuters poll showed on Friday.
For the current quarter, however, analysts are concerned about rising risks, including the possibility of global economic slowdown and a resurgence of COVID-19 cases in Japan.
The world’s third-largest economy likely grew at an annualized 2.5 percent rate in April-June, rebounding from a 0.5 percent contraction in the first quarter, according to the median forecast of 17 economists.
Second-quarter expansion was driven largely by a projected 1.3 percent rise in private consumption, which accounts for more than half of Japan’s gross domestic product (GDP), the poll showed.
Capital expenditure likely expanded 0.9 percent, according to the poll, which also suggested external demand had added 0.1 percentage point to GDP growth.
A recovery in consumption since the lifting of COVID-19 curbs in March boosted April-June growth, said Saisuke Sakai, senior economist at Mizuho Research and Technologies, who also pointed to robust corporate investment deferred from last year.
All this offset the negative effect on Japanese output from lockdowns in China, Sakai said.
But Japan’s “recovery pace will be slower in July-September as households could turn wary amid the (renewed coronavirus) outbreak, coupled with other downside risk factors, such as rising prices and a slowing global economy,” he added.
Separate data will likely show Japan’s June current account balance marked its first deficit since January, because of soaring imports. The median estimate is for a shortfall of 703.8 billion yen ($5.29 billion).
Wholesale prices were estimated to be 8.4 percent higher in July than a year earlier, the pace of rises decelerating for a third month, the poll also showed. Wholesale price inflation hit a record 9.9 percent in April.
Japan upgraded its overall view on the economy for the first time in three months in July, signalling a broader recovery in economic activity as the drag from the COVID-19 pandemic continued to fade.
The upgrade was largely because the government turned more positive about consumption and employment amid hopes that strength in consumer activity will help shield the economy from rising risks of slowing global demand.
“The economy is picking up gently,” the government said in its July economic report, describing the world’s third-largest economy in a way that it had not done since May 2013.
The government raised its view on private consumption, saying it was gently picking up as it became more optimistic about spending on services such as overnight stays and transportation.
Analysts have generally been less upbeat about Japan’s private consumption, which accounts for more than half of the economy, warning of the likelihood that rising prices are suppressing consumption.
The economy is expected to have returned to growth in the second quarter following a contraction in January-March, though its recovery has especially come under pressure from prolonged disruptions in the supply of parts and high-tech chips.
In the July report, the government raised its view on employment conditions, reporting a rising trend in the number of workers, adding that the number of women who were in regular employment was rising.
The government also raised its view of imports which it said reflected robustness in domestic demand.
However, the government warned that attention should be paid to downside risks from climbing raw material costs and supply constraints, as well as fluctuations in financial and capital markets amid tightening of monetary conditions around the world.