MNI BRIEF: Japan Q3 GDP Drops 0.4% Q/Q; Annualised -1.8%

Japan’s economy contracted 0.4% q/q, or an annualised -1.8%, in July-September, marking the first decline in six quarters as weak private consumption, housing investment and net exports weighed on activity, preliminary Cabinet Office data showed Monday.

The Q3 fall was smaller than the MNI median forecast of -0.7% q/q, or an annualised -2.7%, indicating the pullback following Q2’s front-loaded demand was modest.

Private consumption, about 60% of GDP, rose 0.1% q/q after an unrevised 0.4% increase in Q2.

Business investment climbed 1.0% q/q for a fourth straight gain after a revised 0.8% rise in Q2.

Net exports subtracted 0.2 percentage points from GDP after contributing 0.2 pp in Q2. Exports fell 1.2% q/q after a 2.3% rise in Q2, while imports dipped 0.1% following a 1.3% increase in the previous quarter.

Private inventories reduced GDP by 0.2 pp after a flat contribution in Q2. Public investment edged up 0.1% q/q, contributing 0.0 pp.

The data may ease some Bank of Japan concerns over a sharp post-Q2 correction as officials assess the economic impact of the front-loaded demand ahead of trade policy shifts.

BOJ officials remain focused on how the economy, particularly exports and production, has been developing in and after October.