© Reuters. FILE PHOTO: A cargo ship and containers are seen at an industrial port in Tokyo, Japan, February 15, 2022. REUTERS/Kim Kyung-Hoon
By Tetsushi Kajimoto TOKYO (Reuters) -Japan’s economy unexpectedly shrank in the third quarter, the first contraction in a year as cooling global growth and higher import costs took a toll on household consumption and business activity. Soaring global inflation and recession risks as well as a weak Japanese yen and sweeping interest rate increases worldwide have undermined the post-COVID recovery in the world’s third-biggest economy. Gross domestic product fell an annualised 1.2% in July-September, official data showed, compared with economists’ median estimate for a 1.1% expansion and a revised 4.6% rise in the second quarter. It translated into a quarterly decline of 0.3%, versus a forecast 0.3% growth. On top of the pressures from slowing global growth and the Ukraine war, Japan has been dealing with the challenge of the yen’s slide to 32-year lows against the dollar, which has magnified cost-of-living strains by further lifting the price of everything from fuel to food items. Prime Minister Fumio Kishida’s government is stepping up support for households to try to ease the effects of cost-push inflation, with 29 trillion yen ($196 billion) in extra spending in the budget.
Private consumption, which makes up more than half of the Japanese economy grew 0.3%, against a consensus estimate for 0.2% growth and slowing sharply from the previous period’s 1.2% gain. Exports grew by 1.9% but were overwhelmed by hefty gains in imports, meaning external demand subtracted 0.7 percentage points from GDP.