Japan's third-quarter gross domestic product (GDP) contracted by 0,4% compared to the previous quarter. On an annualized basis, the economy declined by 1,8%. While both figures were better than forecasts, this marks the first time in 6 quarters that Japan's economy has experienced negative growth.

The contraction was largely driven by a significant decline in exports. Exports decreased by 1,2% in the third quarter. This follows 4 consecutive months of decline before a slight rebound in September, reflecting the broader impact of trade tensions.

Consumer spending, which accounts for over half of Japan's GDP, saw a modest increase of 0,1% from the previous quarter. This rate was slower than the 0,4% rise in the second quarter, suggesting that elevated food prices have made consumers hesitant to spend. Business investment, however, grew by 1% in the third quarter, and public spending rose by 0,5%.

Customers outside a pharmacy in Tokyo, Japan. *Photo: Reuters*

The economic slowdown comes after a period of growth in the second quarter, when preliminary data showed the economy expanded by 2,3%. This earlier growth was primarily attributed to a surge in early exports to the United States amidst ongoing trade negotiations between the two countries.

In September, US President Donald Trump signed an executive order imposing 15% tariffs on nearly all Japanese goods entering the United States. This new rate represented a reduction from previous tariffs of 27,5% on automobiles and 25% on most other goods.

Analysts are now closely watching whether the world's 4th largest economy can quickly overcome the impact of these import tariffs. The latest economic figures coincide with new Prime Minister Sanae Takaichi's government drafting a stimulus package designed to support households facing rising living costs. Advisors close to the Prime Minister may leverage the sharp GDP decline to advocate for more aggressive stimulus measures. They could also urge the Bank of Japan (BOJ) to slow down interest rate increases to further support the economy.

By Ha Thu (according to Reuters, CNBC)