GDP slips in the third quarter
Japan’s economy shrank at an annualized pace of 2.3 percent between July and September, reflecting a 0.6 percent decline from the previous quarter. Revised figures from the Cabinet Office showed a sharper downturn than initially reported, signaling more pressure on growth.
The updated data highlights slowing momentum in key sectors, raising concerns over how long Japan can maintain stability while dealing with persistent external challenges.
Tariffs disrupt export performance
Exports fell 1.2 percent quarter over quarter, continuing the strain caused by elevated U.S. import tariffs earlier in the year. Although some duties were reduced in September, automobile shipments remain heavily impacted, limiting recovery for one of Japan’s most important industries.
Trade tensions have also tested diplomatic relations with Washington, complicating efforts to boost confidence among manufacturers and investors.
Housing activity falters under regulatory changes
Private residential investment sank 8.2 percent as new building code rules led to a steep drop in housing starts earlier this year. The weakness in construction weighed further on economic activity, offsetting modest improvements in household spending, which rose just 0.2 percent.
Imports also slipped 0.4 percent, signaling ongoing caution from both businesses and consumers as uncertainty persists.
Political backdrop and outlook
Japan’s new prime minister, Sanae Takaichi, has gained public support with a firm stance on national priorities and policies aimed at revitalizing the economy. Still, economists warn that the path forward depends heavily on trade conditions and a stronger domestic rebound.
While policymakers express confidence in a turnaround, the latest figures underscore significant risks if export recovery remains limited.
