TOKYO—Japan’s economy contracted for the first time in a year in the third quarter, reflecting weak external demand and a sluggish recovery in private spending amid lingering fears over Covid-19 and rising prices.
The world’s third-largest economy after the U.S. and China contracted 0.3% in the three months through September from the previous quarter. That compares with 1.1% growth in the previous quarter and consensus forecasts for a 0.2% expansion.
The economy shrank 1.2% on an annualized basis, which reflects what would happen if the third-quarter pace continued for a full year.
External demand, which is measured by exports minus imports, subtracted 0.7% from growth.
Private consumption increased 0.3% from the previous quarter. Japanese consumers enjoyed the first summer without movement restrictions since the pandemic hit in early 2020. However, the recovery in spending was limited as Covid-19 infections rose again during the period and because of growing inflation.
Capital expenditures increased 1.5% from the previous quarter thanks to some improvements on supply-chain constraints.
Economists expect the Japanese economy to grow in the October-December quarter, helped by government stimulus, such as travel subsidies. But some say concerns over the global economic slowdown triggered in part by the U.S. Federal Reserve’s aggressive interest-rate increases may be making companies hesitant to move ahead with capital expenditures.
Write to Megumi Fujikawa at [email protected]
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