Japan's economy contracts less than expected in third quarter, helped by consumption

Japan’s economy contracted by a smaller-than-expected 0.4% in the quarter ended September compared to the previous three months, helped by both private and government consumption.

Economists polled by Reuters had expected a 0.6% decline.

On an annualized basis, Japan’s GDP for the third quarter of 2025 fell 1.8%, a softer decline compared with estimates of a 2.5% contraction.

Exports of goods and services shrank 1.2% compared to the second quarter when they had risen by 2.3%. Net exports contributed to a 0.2 percentage point drop in GDP.

Japan’s shipments had seen contractions for four straight months since May as U.S. tariffs hurt exports, although September saw a rebound to growth. Tokyo in July clinched a trade deal with Washington, bringing down tariffs on its exports to the U.S. to 15% from 25%. The 15% tariffs took effect on Aug. 7.