# Japan’s economy likely shrank in Q3 on weak consumption, output – Reuters poll
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-11-05
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Japan's Economy Contracts in Q3 Due to COVID-19 Curbs
Meta Description: Analysts predict Japan's economy shrank in Q3 due to COVID-19 restrictions and supply chain issues, hindering recovery from the pandemic's impact.
URL: https://financedigest.com/japans-economy-likely-shrank-in-q3-on-weak-consumption-output-reuters-pollhtml

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By Leika Kihara

TOKYO (Reuters) – Japan’s economy likely contracted in the third quarter as curbs to contain COVID-19 infections and supply constraints hit consumption and output, a Reuters poll showed, underscoring the slow pace of recovery from the pandemic’s damage.

While analysts expect growth to rebound in the current quarter, the weak data would reinforce expectations Japan will lag other countries in withdrawing crisis-mode stimulus steps.

The [world’s third-largest economy](https://www.financedigest.com/at-chinas-largest-trade-fair-exporters-worry-about-world-economy.html "At China’s largest trade fair, exporters worry about world economy") likely shrank an annualised 0.8% in July-September after expanding 1.9% in the previous quarter, due largely to an expected 0.5% slump in consumption, according to analysts polled by Reuters.

External [demand neither contributed nor shaved off gross domestic](https://www.financedigest.com/turkeys-economy-grew-7-6-in-q2-driven-by-domestic-demand-exports.html "Turkey’s economy grew 7.6% in Q2 driven by domestic demand, exports") product (GDP) and capital expenditure shrank 0.6% from the previous quarter, the poll showed, a sign corporate activity may be losing momentum after having served as a driver of growth.

Consumption, capital expenditure and exports likely all fell in a [sign Japan’s](https://www.financedigest.com/japan-uk-to-sign-reciprocal-access-agreement-for-military-officers-yomiuri.html "Japan, UK to sign reciprocal access agreement for military officers -Yomiuri") economy continued to slump,” said Saisuke Sakai, senior economist at Mizuho Research and Technologies.

“Service spending will recover as vaccinations proceed. But fears over another [wave of infection could weigh on consumption next](https://www.financedigest.com/the-next-wave-of-fintech-is-here.html "The Next Wave of Fintech is here") year, adding to headwinds such as the prolonged impact of chip shortages and worsening terms of trade,” he said.

The [government will release preliminary third-quarter GDP data](https://www.financedigest.com/internet-data-growth-has-not-pushed-up-telcos-network-costs-dutch-government-says.html "Internet data growth has not pushed up telcos’ network costs, Dutch government says") at 8:50 a.m. on Nov. 15 (2350 GMT, Nov. 14).

Japan’s [economy emerged from last year’s initial hit](https://www.financedigest.com/uk-economy-set-for-smaller-hit-in-2023-than-previously-feared-imf.html "UK economy set for smaller hit in 2023 than previously feared – IMF") from the pandemic thanks to robust global demand. But a string of emergency curbs to combat the pandemic weighed on [consumption and delayed a sustained recovery in growth](https://www.financedigest.com/portugals-q3-growth-accelerates-with-consumption-but-future-not-shining.html "Portugal’s Q3 growth accelerates with consumption but future not shining").

While the Sept. 30 lifting of curbs is expected to prop up consumption, chip shortages, rising raw material costs and [supply chain disruptions have hit output](https://www.financedigest.com/britains-car-output-drops-6-as-supply-woes-persist.html "Britain’s car output drops 6% as supply woes persist") and exports.

Separate data is likely to show Japan’s annual wholesale [inflation hit](https://www.financedigest.com/uks-december-shopper-numbers-defy-inflation-and-rail-strikes-hit.html "UK’s December shopper numbers defy inflation and rail strikes hit") 7.0% in October, exceeding 6.3% in September, in a sign rising raw material costs are hurting corporate margins.

The [Bank of Japan will release the wholesale](https://www.financedigest.com/citigroup-to-buy-deutsche-bank-license-in-mexico-for-wholesale-unit.html "Citigroup to buy Deutsche Bank license in Mexico for wholesale unit") price data at 8:50 a.m. on Nov. 11 (2350 GMT, Nov. 10).

(Reporting by Leika Kihara; Editing by Robert Birsel)


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