Japan Q3 GDP -0.4% q/q (expected -0.6%). Preliminary reading.

Japanese economic contraction in Q3 2025

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Japan’s economy contracted less than expected in the third quarter, with GDP falling 0.4% quarter-on-quarter versus forecasts for a 0.6% decline. On an annualised basis, output shrank 1.8%, also better than the expected 2.5% drop, as a soft global backdrop and sluggish domestic conditions continued to weigh on activity.

GDP q/q preliminary -0.4%

• expected –0.6%, proir 0.5%

– GDP Annualised -1.8%

• expected –2.4%, prior 1.6%

The breakdown showed a mixed picture:

• Private consumption — roughly half of Japan’s economy — barely grew, rising just 0.1%, exactly in line with expectations and highlighting households’ ongoing caution in the face of still-elevated prices:
  • expected 0.1%, prior 0.4%
• Capital expenditure, however, provided a rare bright spot, expanding 1.0% and beating the 0.3% consensus as firms continued to invest despite weaker demand:
  • expected 0.3%, prior 0.6%
• External demand remained a drag. Net exports shaved 0.2 percentage points off growth, with exports down 1.2% quarter-on-quarter amid global softness and the lingering impact of trade tensions:
  • expected -0.2%, prior 0.3%
• Domestic demand also subtracted 0.2 points, illustrating how both internal and external engines of growth stalled simultaneously.

The GDP deflator rose 2.8% year-on-year, underscoring persistent underlying inflation as the Bank of Japan assesses whether price gains are durable enough to justify further policy normalisation:

• expected 2.8%, prior 3.0%

This article was written by Eamonn Sheridan at investinglive.com.