By Daniel Leussink

TOKYO (Reuters – Japan’s economy will grow rapidly in the current quarter, and for the first three-months of next year. This is because consumer and corporate activity have been recovering from a serious pandemic.

However, the third-largest global economy still faces uncertainties from rising raw material and international energy prices. Analysts warn of a negative impact.

The median prediction of almost 40 economists is that Japan’s Gross Domestic Product (GDP), will grow by 6.1% per year this quarter. That’s much higher than last month’s 5.1% increase.

The rebound is a result of the 36% decline in third quarter sales. This would be a welcome development for policymakers, who want to help the economy recover from the effects of the economic downturn.

Toshiaki Ono (senior economist, Fukoku Mutual Life Insurance) stated that “It is of course difficult to imagine consumption recovering to pre-coronavirus level at once.”

He said that a rise in people outings was expected to increase the economy’s growth this quarter, even though services spending remains lower than it was before the crisis.

The expected growth rate was 4.9% annually in the first quarter 2022. This is higher than the projected 4.2% increase in December’s poll.

As it sought to mitigate the effects of the pandemic and go against the global trend towards unwinding crisis-mode stimuli, the government announced a spending package worth $490 billion last month.

Analysts hope that private consumption will be benefited from the government’s spending package. This includes its plans to revive domestic tourism.

The median poll prediction for this fiscal year, however, was reduced to 2.8%, from 3.1% last month. However, it was increased to 3.1% for next fiscal year from 2.8%.

The poll found that core consumer prices (which exclude volatile fresh foods prices) were forecast to increase 0.8% in the next fiscal year. This compares to 0.7% growth projected last month.

This would be based on a flat reading for the fiscal year and remain unchanged from last month.

More than 90% of the economists polled believed that changes in crude oil, energy, and raw materials prices would have a negative impact on the economy in the coming year. However, any rises in price in the country are likely to be modest compared to other advanced countries.

Masamichi Adachi (chief economist for Japan, UBS Securities), said that any fluctuations in the input prices could hinder firms’ ability to grow their businesses aggressively.

Adachi stated that large changes in input prices caused by import costs could make it harder for businesses to manage operations.

(For more stories, see the Reuters economic poll: