Japan's economy shrinks for first time in six quarters
Japan’s economy shrank by almost 2% in the third quarter, marking its first contraction in six quarters, government data revealed on Monday, News.Az reports, citing Reuters.
The decline was driven largely by a drop in exports due to U.S. tariffs, with shipments from automakers falling sharply after a period of elevated exports prior to the tariffs’ implementation.
Still, as the overall contraction was not as acute as expected, it likely represents a temporary setback rather than the start of a recession, economists said.
Economists generally viewed this quarter's GDP figures as having a marginal impact on Bank of Japan thinking when next deciding interest rates versus factors such as inflation. However, an economist close to Prime Minister Sanae Takaichi gave the data more weight.
Given the contraction, it "would be misguided for the BOJ to decide to raise interest rates" in December, Credit Agricole chief Japan economist Takuji Aida, who is on Takaichi's flagship panel tasked with laying out the country's growth strategy, said in a report to clients.
Gross domestic product contracted 1.8% in July-September. That compared with revised growth of 2.3% in the previous three-month period, as well as the 2.5% contraction that economists on average estimated in a Reuters poll.
The reading also translated into a quarterly contraction of 0.4% versus the median estimate of 0.6%.
Exports constituted the main drag as the impact of higher U.S. tariffs intensified. Automakers saw shipment volume plunge, reversing earlier front-loaded exports ahead of tariff hikes, though they mostly absorbed tariffs by cutting prices.
Net external demand, or exports minus imports, knocked 0.2 of a percentage point off growth, versus a 0.2 point positive contribution in April-June.
The U.S. and Japan formalised an agreement in September that implemented a baseline 15% tariff on nearly all Japanese imports, versus an initial 27.5% on autos and 25% for most other goods.
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