Japan’s economy shrinks, business spend declines

2.5%

Drop in Japan’s GDP during July and September 2018

tokyo — The Japanese economy contracted the most in over four years in the third quarter as companies slashed spending, threatening to chill the investment outlook in 2019 as the export-reliant nation grapples with slowing global growth and trade frictions.

The slump in the world’s thirdbiggest economy adds to signs elsewhere in Asia and Europe of weakening momentum, with recent data in China and Australia showing a slowdown in growth and stoking concerns about the wider impact of the Sino-US trade war.

Japan’s gross domestic product shrank at an annualised rate of 2.5 per cent in the July-September quarter — the worst downturn since the second quarter of 2014 — from 2.8 per cent growth in the second quarter, revised data from the Cabinet Office showed.

The slide, in part driven by a series of natural disasters that forced factories to cut production, was deeper than an initial estimate of a 1.2 per cent contraction and against economists’ median forecast for a 1.9 per cent decline.

The capital expenditure component of GDP fell a sharp 2.8 per cent from the second quarter, worse than the expected 1.6 per cent decline and the preliminary reading of a 0.2 per cent drop.

That was the biggest decrease since the third quarter of 2009, as wholesalers, retailers, and information and communications machinery cut spending, the Cabinet Office data showed.