Economists recently polled by Reuters have downgraded their forecasts for the Japanese economy, expecting a slower pace of growth in Q2 2021 due to the fourth wave of the pandemic and resultant restrictions that have been imposed. The world’s third largest economy could grow by 1.7% between April and June, slower than the previous estimate of 4.7% made back in April.

Respondents were almost unanimous in expecting the government to announce an additional budget with more stimulus initiatives to counter the economic impact of the latest wave of the pandemic. The Japanese government has extended its state of emergency until the end of May across Tokyo and other key parts of the nation, which has hurt consumer consumption and overall economic activity as well.

Economists expect the Q1 GDP to come in at -4.5% despite the pick-up in overseas demand as Japan’s key trade partners started making their way towards recovery from the crisis. Even before the latest wave of the pandemic and the most recent round of restrictions, Japan’s economy was under strain as domestic consumption levels remained weak with consumers hesitant to spend in the wake of the pandemic-driven uncertainties.

Looking ahead, economists anticipate the overall GDP for fiscal 2021 to slide to 3.6% from the previous estimate of 3.9%. In the next fiscal year starting in April 2022, the GDP could ease lower to 2.4%. The GDP estimates have been revised lower not only due to the latest resurgence in cases but also due to the slow rollout of the COVID-19 vaccine across Japan.