Japan's Economy Contracts in Q3

Overview

Japan's economy faced a setback in the July-September period as domestic consumers and companies exhibited sluggish spending behavior. The economy contracted by 0.5% during this period, marking its first decline in three quarters. This result deviated from economists' forecast of a 0.1% contraction and the 1.1% growth witnessed in the previous quarter (April-June). In contrast, the United States and China experienced signs of economic acceleration during the third quarter.

Consumption and Capital Expenditures

Private consumption in Japan remained stagnant from the previous quarter. Consumers were wary of spending due to price increases, counteracting the recovery seen in service sectors such as travel and dining. At the same time, capital expenditures dropped by 0.6% due to uncertainties surrounding the global economic outlook. Additionally, external demand, calculated as exports minus imports, subtracted 0.1 percentage point from Japan's gross domestic product.

Outlook

Despite the current contraction, economists anticipate a return to growth for the Japanese economy in the October-December period. This projection is supported by a recovery in domestic demand and the resurgence of inbound tourism.