Japan’s economy contracts unexpectedly as consumption slows

Asia’s second-largest economy shrinks 0.3 percent after three straight quarters of growth.

Japan’s economy contracted unexpectedly in the third quarter as private consumption plunged and import costs rose.

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

The worse than expected performance translates into an annualized 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 1.2 percent rise in the previous quarter.

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

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

Japan’s currency fell to a 32-year low in October, hitting 151 yen to the US dollar, though it has since recouped some of its losses.

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

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