Japan's economy shrank an annualized real 2.1 percent in the July-September period for the first pullback in three quarters, reflecting sluggish private consumption amid elevated prices and weak capital investment, preliminary government data showed Wednesday.
Real gross domestic product, the total value of goods and services produced in the country adjusted for inflation, decreased 0.5 percent from the April-June quarter, according to the Cabinet Office.
The figure was worse than the average market forecast of an annualized 0.42 percent contraction in a poll conducted by the Japan Center for Economic Research.
Private consumption fell 0.04 percent, dropping for the second quarter in a row, on the back of a slump in car sales and spending on food items even as households loosened their purse strings for eating out amid an easing of coronavirus restrictions.
Business investment decreased 0.6 percent, down for the second straight quarter, mainly hit by slowed expenditure on equipment used for the production of semiconductors.
Consumer spending for the third quarter of this year "lacked dynamism" amid inflation, while poor capital expenditure possibly reflected "a cautious view on overseas economies prevailing among businesses," said Keiji Kanda, a senior economist at the Daiwa Institute of Research.
Exports gained 0.5 percent, supported by brisk car shipments amid the yen's weakness against the U.S. dollar.
But growth decelerated compared with a 3.9 percent jump in the previous quarter, partly due to China's ban on Japanese seafood imports following the release of treated radioactive water from the disaster-ruined Fukushima Daiichi nuclear power plant into the ocean, according to a government official.
Exports of services were down 0.2 percent, as consumption by inbound tourists fell for the first time in five quarters.
Imports, whose growth impacts GDP negatively, rose 1.0 percent, compared to a 3.8 percent decline in the previous quarter, as royalty payments by Japanese firms to foreign companies swelled, the official said.
Government spending climbed 0.3 percent as medical care costs grew, while public investment saw the first decline in six quarters.
As for the outlook, Kanda said that the world's third largest economy is expected to "remain on a mild recovery path, although far from being strong," projecting around 1 percent growth in the October-December period.
"There is still room for recovery" in private consumption, Kanda said, noting that auto production has yet to catch up with orders following production suspensions at some of automakers' domestic factories. He also pointed to a rise in the minimum wage and an expected slowdown of inflation as positive factors.
Nominal GDP was down 0.04 percent from the previous quarter, or 0.2 percent at an annualized rate.
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