Analyst: Japan's economy contracts for the first time in six quarters, complicating the central bank's rate hike path

ChainCatcher News, Japan's economy has experienced its first contraction in six quarters, further complicating the Bank of Japan's timetable for its next interest rate hike. Preliminary government data released on Monday showed that Japan's real GDP shrank by 0.4% quarter-on-quarter in Q3, marking the first contraction since Q1 2024. On an annualized basis, the economy contracted by 1.8%. The economic weakness may support the view that the Bank of Japan will wait until next year before taking any policy action.

Specifically, in the July to September quarter, external demand caused the country's GDP to decline by 0.2 percentage points, reflecting the impact of increased U.S. tariffs. Housing investment was another major drag, falling by 9.4% from the previous quarter. Nevertheless, economists believe that this decline was caused by temporary factors related to regulatory changes, and they expect the market to recover.