By Daniel Leussink

TOKYO (Reuters – Japan’s economic growth is likely to slow down this quarter, as supply disruptions caused by coronavirus restrictions and curbs to the virus threaten to derail its economic recovery.

In January, the projection was for a slower expansion. This is a result of heavy damage to parts and Omicron variant shortages that are affecting the world’s third largest economy.

An economic setback can put more pressure on government officials to act to mitigate a spike in energy prices globally and support families ahead of the next upper house election, due to take place this summer.

Japan’s economy is expected to grow 0.4% annually in the first quarter. That’s a decrease from the 4.5% growth predicted by nearly 40 analysts. The poll, which was most recently conducted prior to Russia’s invasion in Ukraine, only included the median forecasts of about 40 analysts.

Annual growth was 5.4% for the economy in the final months last year. Seasonally adjusted real GDP (real gross domestic product) remained at 541 trillion yen ($4.7 Trillion), lower than it was pre-pandemic.

Japan’s economic outlook is now more uncertain due to Russia-Ukraine crises and rising energy and raw materials prices. This has been exacerbated by a weaker Japanese yen.

The Japanese currency was at its lowest level in five years against the U.S. dollars in January and it has been hovering close to this level since.

A February 15-25 survey found that the greatest threat to America’s economy for the next year would be the emergence and spread of coronaviruses. These will then be followed by an increase in U.S. supply chain disruptions and tighter monetary policies.

AtsushiTakeda, Itochu Economic Research Institute chief economist said that the economy must recover from “Private consumption.”

It is still possible for Coronavirus trends to continue to exist.

The poll shows that economic growth should increase by 5.6% per year in the second trimester, which is higher than last month’s forecast of 3.4%.

According to the poll, 2.9% of fiscal 2022’s GDP would be grew, with an initial April start, following a expected 2.5% growth this fiscal year.

After a projection flat for this fiscal, core consumer prices will go up 1.2% next year.

A question regarding U.S. rate hikes was answered by three-quarters (33 analysts) who said multiple increases in U.S. Federal Reserve interest rates would have no significant impact on Japan’s economic health.

Only eight of the remaining quarter respondents said multiple U.S. interest rate hikes would cause serious economic harm, but none thought it would.

HarumiTaguchi, chief economist at IHS Markit said that the impact of this will be minimal if supply restrictions are improved and prices kept under control by rate rises.

The risk of the United States entering a spiral of price rises and wage increases if prices go up faster than predicted and lower consumers’ purchasing power is high.