Japan’s economy contracted in Q3 as demand waned

A woman looks at items at a shop in Tokyo, Japan, March 24, 2023. REUTERS/Androniki Christodoulou/File photo

TOKYO  – Japan’s economy contracted in July-September, snapping two straight quarters of expansion, squeezed by weakening demand and complicating policymakers’ efforts to revive faltering growth.

Gross domestic product (GDP) in the world’s third-largest economy contracted 2.1 percent in the third quarter, a much larger decline that economists’ median forecasts for an annualized 0.6 percent fall.

It followed an annualized expansion of 4.5 percent in the previous quarter.

READ: Japan’s Q2 GDP grows much faster than expected, helped by exports

The weak reading reflects lackluster consumption and capital expenditure, dashing policymakers’ hopes for a post-pandemic rebound in domestic activity to offset weaker external demand from China and elsewhere.

Consumption fell slightly in July-September compared with economists’ median estimate for 0.2 percent growth in July-September from the previous quarter after falling 0.9 percent in April-June.

Capital expenditure fell 0.6 percent in the third quarter, versus a 0.3- percent gain seen by economists, after declining 1 percent in April-June.

External demand shaved 0.1 of a percentage point off GDP in July-September, in line with expectations.