Japan's Economy Faces Slower Growth Despite Consumer Boost

Japan's economy grew by 0.9% in the July-September quarter, slowed by weak capital spending but buoyed by unexpected rises in consumption. This highlights Japan's economic vulnerability amidst U.S. and China slowdowns. Strong consumption supports inflation reaching 2% and potential rate hikes.

Japan's economy recorded an annualised growth of 0.9% in the third quarter, as per government data released on Friday. While tepid capital spending slowed the expansion, a surprise uptick in consumption offered a bright spot in the economic landscape.

The increase, faster than the anticipated 0.7% but below the revised 2.2% in the previous quarter, underscores Japan's economic fragility amid potential slowdowns in the U.S. and China, which could dampen exports.

Consumption, accounting for more than half of the economic output, exceeded expectations with a 0.9% rise. Economists like Kengo Tanahashi of Nomura Securities credit this to one-off factors such as recovery in auto production and temporary tax cuts.