(Bloomberg) -- Japan’s economy contracted more than expected in the third quarter after an earthquake, typhoons and torrential rain battered production at home while exports declined amid softer demand overseas.
Japan’s gross domestic product shrank by an annualized 1.2 percent in the three months through September, according to the Cabinet Office, compared with economists’ estimates for a drop of 1 percent. Weaker private consumption and a fall in overseas shipments contributed to the decline.
Key Insights
- Typhoons, an earthquake and heavy rains hit regions including Osaka, Tokyo and Hokkaido in the quarter, disrupting supply chains and shutting down factories and airports.
- Industrial production and household spending fell more than expected in September, suggesting the impact of the natural disasters was worse than initially estimated.
- Relief efforts in the wake of the disasters are likely to support the economy in the fourth quarter.
- Patchier growth is unwelcome news for Prime Minister Shinzo Abe, who last month confirmed a sales tax hike would go ahead next year given the strength of the economy.
- A slowdown in China was expected to be among the main causes for weaker exports from Japan.
- A record drop in machine orders and the first fall in exports in nearly two years in September had added to concerns that China’s slowdown and the trade war were starting to take a toll on Japan’s economy.
- While the economy is seen expanding this quarter, economists warned that growth would be limited in scale.
- “Japan’s recent economic indicators have been pretty disappointing,” said Hiroaki Muto, chief Japan economist at Tokai Tokyo Research Center, ahead of the release.