Japan's economy contracts for first time in six quarters on US tariff hit

Economists see it as a temporary setback rather than the start of a recession

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Japan's economy contracted an annualised 1.8 per cent in the July-September quarter, narrower than a median market estimate of 2.5 per cent in a Reuters poll. Exports were the main drag as the impact of higher US tariffs intensified.

(PHOTO: EPA)

Japan's economy contracted an annualised 1.8 per cent in the July-September quarter, the first fall in six quarters, due to a hit to exports from US tariffs, government data showed on Nov 17.

While that could complicate any central bank plan to raise its policy interest rate, the contraction was not as acute as expected by economists, who called it a temporary setback rather than the start of a recession.

"The contraction is largely due to onetime factors such as housing investment" affected by regulatory change, said Meiji Yasuda Research Institute economist Kazutaka Maeda.