Japan's Economic Hiccup: A Temporary Slowdown Amidst Global Headwinds

Japan's economy shrank by nearly 2% in Q3, primarily due to decreased exports amid U.S. tariffs. While the contraction may complicate policy decisions, it is viewed as a temporary issue rather than the onset of a recession. Economists anticipate a gradual recovery over the next year.

Japan's economy experienced a downturn of nearly 2% in the July-September quarter, primarily driven by a decline in exports as U.S. tariffs took effect, marking the first dip in six quarters, as reported by government data on Monday.

This contraction, attributed to temporary factors such as housing investment and regulatory changes, poses a challenge to any central bank intentions to raise the interest rate. However, experts highlight that it does not signify the beginning of a recession.

Despite the GDP decrease, private consumption rose slightly, and capital spending saw significant growth, suggesting that a moderate economic recovery may be on the horizon, with further support expected from upcoming government stimulus measures.

(With inputs from agencies.)