By Daniel Leussink

TOKYO (Reuters – Japan’s economy grew more slowly than anticipated last quarter, and continues to face risks due to high raw material costs and coronavirus production and disruptions.

After Japan’s COVID-19 cases dropped and progress was made in vaccinations, the central bank and government policymakers hope that a surge of consumer activity will help put Japan’s export-reliant economy back on track.

Analysts warned however of the risks associated with unexpected economic slowdowns and shortages in semiconductor chip or factory parts as a result of the pandemic.

Harumi Taguchi principal economist at IHS Markit stated that there is “a risk of supply chain disruptions lasting longer” and would put downward pressure on global economic growth.

Japan’s economic growth was 0.8% per year in the third quarter according to the median forecast by 39 analysts. That is lower than the 1.2% projection last month.

The poll revealed that 4.5% of growth can be expected this quarter, as the end to the state of emergency curbs increases consumption and corporate activity.

According to the poll, 4.4% was forecasted for October. The projections were roughly consistent with those of last month.

In recent months, parts shortages in Japan and disruptions at factories in Southeast Asia forced Japanese automakers into a reduction in output. This has impacted the prospects for an export-reliant country.

Japanese businesses also have rising raw material prices, which could lead to a decline in margins.

Mari Iwashita (chief market economist, Daiwa Securities) stated that rising input prices will adversely affect terms of trade for Japan as a large importer of raw materials.

Iwashita stated that this would lead to lower corporate profits as well as a reduction in the real buying power of consumers.

A poll showed that Japan’s current Prime Minister Fumio Koshida should be focusing on the fight against the coronavirus, digitalization and stimulation of domestic consumption.

Kishida became the leader of Japan earlier in March after replacing Yoshihide Sug as premier. On Thursday, he called for general elections, which he hopes will consolidate his hold on power.

26 economists were asked what areas they thought the government should be focusing on as the prime minister. They chose to respond to the coronavirus epidemic.

Next came “digitalisation of society and between firms” and “stimulate domestic consumption and private demand”, which were chosen by 17 and 14 economists respectively.

Six economists chose to focus on “social security questions” like the care of elderly and children and the pension system. Three economists chose “foreign policy and security”, but none selected “fiscal Reform”.

Respondents could choose from up to 2 areas.

(For more stories, see the Reuters economic poll).