Japan's economy contracts for first time in six quarters
- - Japan's economy contracts for first time in six quarters
By Makiko Yamazaki and Satoshi SugiyamaNovember 17, 2025 at 5:45 AM
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A store staff member tries to attract customers outside a store in Tokyo, Japan, May 15, 2025. REUTERS/Issei Kato
By Makiko Yamazaki and Satoshi Sugiyama
TOKYO (Reuters) - Japan's economy contracted an annualised 1.8% in the July-September quarter, the first fall in six quarters, due to a hit to exports from U.S. tariffs, government data showed on Monday.
The decline, while not as steep as expected, could complicate the Bank of Japan's plans to raise interest rates further. Analysts are now focusing on how soon the world's fourth-largest economy will overcome the tariff impact and rebound.
The decrease in gross domestic product was narrower than a median market estimate of a 2.5% fall in a Reuters poll.
It followed revised growth of 2.3% in the previous quarter, when the economy got an extra boost from solid exports that reflected front-loading shipments to the U.S. as Japan's tariffs negotiations lingered.
Washington formalised a trade agreement with Tokyo in September, implementing a baseline 15% tariff on nearly all Japanese imports, down from the initial 27.5% on autos and a 25% duty threatened for most other goods.
The third-quarter reading translated into a quarterly fall of 0.4%, better than the median estimate of a 0.6% contraction.
Private consumption, which accounts for more than half of economic output, rose 0.1%, matching a market estimate.
But that cooled from the 0.4% rise in the second quarter, indicating that high food costs kept households reluctant to spend.
Net external demand, or exports minus imports, knocked 0.2 of a percentage point off growth, versus a 0.2 point positive contribution in the April-June period.
Capital spending, a key driver of private demand-led growth, rose 1.0% in the third quarter, versus a rise of 0.3% in the Reuters poll.
The weak GDP data comes as new Prime Minister Sanae Takaichi's government is compiling a stimulus package to cushion the blow to households from the rising living costs.
Close economic advisers to Takaichi have cited a likely sharp GDP contraction as a reason for aggressive stimulus measures.
The latest data could embolden those advisers to call for the BOJ to go slow in raising interest rates, analysts say.
(Reporting by Makiko Yamazaki and Satoshi Sugiyama; Editing by Jamie Freed)
Source: “AOL Money”
