Japan Economy May Rebound But Price Surge Threatens

Japan's economy is likely to be on a growth track from the current quarter, but analysts say surging commodity prices due to Russia's war in Ukraine will weigh on private consumption and become a headwind to its recovery from the coronavirus pandemic fallout, Kyodo News reported.

Photo Insert: A vegetable store owner in Japan

After all COVID-19 curb measures to contain the surge of infections caused by the Omicron variant were lifted in late March, many analysts expect a strong increase in gross domestic product in the April to June quarter led by the services sector, following an annualized real 1.0 percent decline in the January to March period.

Annualized real GDP in the first quarter came to 537.92 trillion yen ($4.2 trillion), still lower than the October to December quarter of 2019, the last pre-pandemic quarter when it was 541.81 trillion yen, according to preliminary data released by the Cabinet Office on Wednesday.

The GDP growth forecasts by 36 economists averaged an annualized 5.18 percent expansion for the second quarter of 2022, and they forecast that growth will gradually lose momentum in the following quarters to 3.11 percent, 2.04 percent and 1.71 percent, Mainichi Shimbun also reported.

For the whole of fiscal 2022 from April, growth of 2.37 percent is expected, according to a poll by the Japan Center for Economic Research. But many analysts including Yoshiki Shinke, senior executive economist at the Dai-ichi Life Research Institute, warn of being too optimistic about the outlook as the impact of the war that started on Feb. 24 will start to manifest in coming quarterly data.

"Price hikes in daily necessities including food will dampen consumer sentiment and weigh on private spending," Shinke said.

"Once an expected rebound in the April-June quarter runs its course, the impact of rising prices will be easier to feel." Japan's core consumer price index already gained 0.8 percent in March from a year earlier, the fastest pace in over two years, due to surging fuel and raw material costs.

WEEKLY FEATURE : MVP Group Keeps Lights On During Pandemic