E-Paper
Japanese economy contracts as Takaichi readies stimulus
Japanese economy contracts as Takaichi readies stimulus
Japan's economy shrank 0.4 percent in the three months to September, official data showed Monday, as new Prime Minister Sanae Takaichi's government prepares a major stimulus package.
The quarter-on-quarter reading for gross domestic product beat market expectations of minus 0.6 percent but was the first contraction since the first quarter of 2024.
The preliminary, seasonally adjusted figure follows growth of 0.6 percent revised upwards from an earlier reading of plus 0.5 percent for the April to June quarter.
Takaichi became Japan's first woman prime minister in October and has tasked her government with putting together a new stimulus package.
Finance Minister Satsuki Katayama said on Sunday that the value would be "well above" 17 trillion yen , local media reported.
The cabinet was expected to approve the package on Friday, the reports said.
BNP Paribas economist Ryutaro Kono said before the data was released that there was no need to view negative growth in the third quarter as "particularly serious".
"Exports rebounded in September on a monthly basis. Surveys... indicate that the overall business conditions in the export sector have not deteriorated due to the US tariff hikes, and corporate willingness to invest in equipment remains solid," Kono said.
- China tensions -
Marcel Thieliant at Capital Economics warned however that current tensions with China following Takaichi's comments about Taiwan risk escalating "into a full-blown trade spat".
"There are several avenues through which this could play out, but the biggest risk is that China restricts exports of rare earths or imposes restrictions on Japanese exports," Thieliant said before the GDP release.
"Carmakers look particularly vulnerable as they are already under enormous pressure from the ascent of Chinese electric vehicle manufacturers," he added.
Takaichi told parliament on November 7 that an armed attack on Taiwan could warrant sending troops to the island under "collective self-defence".
China and Japan last week summoned each other's ambassadors, with Beijing advising its citizens to avoid travelling to Japan.
Beijing insists Taiwan, which Japan occupied for decades until 1945, is part of its territory and has not ruled out the use of force to seize control.
China and Japan are key trading partners, but historical mistrust and friction over territorial rivalries and military spending often test those ties.
The data from the cabinet office also showed that a drag on economic growth was weak residential investment.
Trade officials in July reached a deal that saw the United States lower tariffs on Japanese goods to 15 percent from a threatened 25 percent.
Japanese cars were taxed at a higher rate of 27.5 percent and the reduction to 15 percent did not take effect until mid-September.
hih-stu/tc
This article was generated from an automated news agency feed without modifications to text.
