Japan’s economy set to slow sharply as global inflation and recession risks hurt – Reuters poll | The mighty 790 KFGO

By Tetsushi Kajimoto

TOKYO (Reuters) – Japan’s economy is expected to have slowed markedly in the third quarter as global recession risks hurt external demand, while rising inflation and the impact of the weak yen on import prices have compels consumers to keep their wallets closed.

Gross domestic product (GDP) data due at 08:50 local time on November 15 (23:50 GMT on November 14) will likely show the world’s third-largest economy grew at an annualized rate of 1.1% in July-September, significantly more slower than the 3.5% expansion in the second quarter.

That would translate to quarterly growth of 0.3%, according to a Reuters poll of 18 economists, also down from the 0.9% pace in April-June.

The significant slowdown partly highlights the severe impact on Japan of the yen’s fall to a 32-year low against the dollar, which has exacerbated pressures on the cost of living by further increasing the price of everything from fuel to food.

Prime Minister Fumio Kishida’s government is stepping up support for households in an attempt to blunt the effects of cost inflation, with 29 trillion yen ($196.09 billion) in additional spending in the budget.

“Unlike Western countries, Japan has not experienced pent-up demand as consumption of services in hotels and restaurants remains stagnant,” despite the easing of coronavirus curbs, said Takeshi Minami, chief economist at the Norinchukin Research Institute.

“Supply-side restrictions have also held back auto production,” he said, adding that “depending on the extent of the downturn in the global economy, Japan could follow suit and you may not rule out the possibility of it sliding into recession next year.”

Capital spending likely supported third-quarter growth and is expected to have risen 2.1% in July-September, compared to a 2% increase in the prior quarter, reflecting improved performance by large exporters and others thanks to increased earnings from a weak yen.

External demand, or net exports – shipments minus imports – likely squeezed 0.2 percentage points from GDP, after adding 0.1 percentage points to the second-quarter gain.

Private consumption, which accounts for more than half of the economy, is expected to have slowed in the third quarter with an increase of 0.2% compared to a gain of 1.2%.

Separate data from the Home Office is also expected to underscore the widespread pressure on the economy, with the pace of growth in household spending nearly halving to 2.7% year-on-year in September, from a gain of 5, 1% in August.

Business strains showed no signs of easing either, as input costs rose sharply. Japan’s Business Goods Price Index, a barometer of the wholesale prices businesses charge themselves, is expected to rise 8.8% year-on-year in October, down from the previous month’s 9.7% .

Household spending data will be released at 08:30 JST on November 8/23:30 GMT on November 7 and the Business Goods Price Index is due at 08:50 JST on November 11/23:50 GMT on November 10.

Data from the Ministry of Finance (MOF), due to be released on November 9 at 08:50 JST and November 8 at 23:50 GMT, will likely show the current account hit 234.5 billion yen ($1.58 billion). in September.

($1 = 147.8900 yen)

(Reporting by Tetsushi Kajimoto; Editing by Shri Navaratnam)