Japan’s gross domestic product declined by 0.4% in the three months ending in September, a smaller contraction than the anticipated 0.6% drop, supported by steady spending from both households and the government. On an annualized basis, the economy shrank at a rate of 1.8%, outperforming expectations of a 2.5% fall. n nPrivate consumption edged up 0.1% compared to the prior quarter, while government spending rose 0.5%, providing a modest buffer against broader economic weakness. However, private demand overall dipped 0.4%, dragging GDP down by 0.3 percentage points, driven largely by a steep 9.4% drop in residential investment. n nExports of goods and services decreased by 1.2% after increasing 2.3% in the second quarter, with net exports reducing GDP growth by 0.2 percentage point. Japanese shipments had faced pressure for four consecutive months through May due to U.S. trade tariffs, though a recovery emerged in September. A bilateral trade agreement reached in July lowered tariffs on Japanese exports to the United States from 25% to 15%, effective August 7. n nPublic demand contributed positively, expanding 0.5% from the previous quarter and adding 0.1 percentage point to economic performance. Despite headwinds in investment and external trade, domestic consumption helped limit the extent of the downturn. n— news from CNBC
— News Original —
Japan’s economy contracts less than expected in third quarter, helped by consumption
Japan’s economy contracted by a smaller-than-expected 0.4% in the quarter ended September compared to the previous three months, helped by both private and government consumption. n nEconomists polled by Reuters had expected a 0.6% decline. n nOn an annualized basis, Japan’s GDP for the third quarter of 2025 fell 1.8%, a softer decline compared with estimates of a 2.5% contraction. n nExports of goods and services shrank 1.2% compared to the second quarter when they had risen by 2.3%. Net exports contributed to a 0.2 percentage point drop in GDP. n nJapan’s shipments had seen contractions for four straight months since May as U.S. tariffs hurt exports, although September saw a rebound to growth. Tokyo in July clinched a trade deal with Washington, bringing down tariffs on its exports to the U.S. to 15% from 25%. The 15% tariffs took effect on Aug. 7. n nDomestic consumption helped slow the economic contraction, with government and private consumption up 0.5% and 0.1%, respectively, compared to the second quarter. n nPrivate demand proved to be the largest drag on GDP this quarter, declining 0.4% compared to the quarter before and pulling the economy down by 0.3 percentage point owed to a sharp plunge in residential investment, down 9.4%. n nPublic demand was a bright spot, growing 0.5% quarter on quarter and contributing 0.1 percentage point to the Japanese economy.