Japan’s economy unexpectedly shrinks as consumptions slows

Japan’s economy has unexpectedly shrunk in the third quarter as private consumption slumped and import costs rose.

Asia’s second-largest economy contracted 0.3 percent during July-September, official data showed on Tuesday, after three consecutive quarters of growth.

The worse-than-expected performance translates into an annualised contraction of 1.2 percent.

Private consumption, which accounts for more than half of Japan’s $5 trillion economy, rose 0.3 percent, well below the previous quarter’s 1.2 percent gain.

While corporate investment rose, private residential investment fell, Japan’s Cabinet office said. Meanwhile, a surge in import costs offset a 1.9 percent gain in exports, according to the official data.

In addition to a slowing global economy and headwinds, including the war in Ukraine, Japan has been grappling with a declining yen, which has exacerbated rising cost-of-living pressures for households and businesses.

The Japanese currency plunged to a 32-year low in October, hitting 151 yen to the US dollar, although it has since recovered some of its losses.

Japanese Prime Minister Fumio Kishida last month unveiled a $260bn stimulus package aimed at propping up the economy.

“We want to protect people’s livelihoods, employment and businesses, while strengthening our economy for the future,” Kishida told reporters at the time.