POLL-Japan’s economy will suffer a collapse in the first quarter due to a drop in consumption

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Reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=JPGDA%3DECI GDP Poll Data

TOKYO, May 11 (Reuters)Japan’s economy likely contracted in the first three months of this year as the lingering fallout from the COVID-19 pandemic weighed on consumption and exports, according to a Reuters poll.

The weak reading will underscore the challenge policymakers face to sustainably pull the world’s third-largest economy out of the pandemic-induced slump.

While the economy is likely to rebound in the current quarter, the outlook remains clouded by Russia’s invasion of Ukraine, which has led to soaring commodity and fuel prices.

Gross domestic product (GDP) likely shrank an annualized 1.8% in the January-March period after expanding 4.6% in the previous quarter, analysts polled by Reuters said. This would translate into a quarterly contraction of 0.4%.

“A sharp drop in consumption was mainly behind the contraction in GDP from January to March, largely due to the appearance of the Omicron variant,” said Saisuke Sakai, senior economist at Mizuho Research and Technologies.

“The recovery will remain subdued due to Japan’s deteriorating terms of trade, blamed on the Ukraine crisis and slowing global growth,” he said.

Private consumption, which accounts for more than half of GDP, likely fell 0.5%, largely due to the Omicron outbreak which forced the government to impose restrictions on activity.

External demand, or exports minus imports, likely depressed GDP growth by 0.3 percentage points, reflecting weak exports.

Capital spending is expected to have risen 0.7% after rising 0.3% in the previous quarter, according to the survey.

The Cabinet Office is due to release GDP data for January to March at 8:50 a.m. on May 18 (23:50 GMT on May 17).

(Reporting by Tetsushi Kajimoto; Editing by Christian Schmollinger)


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