Japan revised its national accounts to show a sharper economic downturn in the July-September quarter, signaling deeper vulnerability across key sectors. The updated figures intensified concerns about domestic resilience as global headwinds continued to weigh on the country’s growth trajectory. The economic downturn also raised doubts about recovery prospects under Japan’s new political leadership.
The Cabinet Office announced that the economy shrank at an annualized rate of 2.3% during the period. The revision showed a steeper contraction than earlier estimates, which had suggested a 1.8% decline. The quarterly figure fell 0.6%, confirming that the slowdown extended across multiple industries. Analysts noted that the updated numbers reflected the broader economic downturn triggered by weakening exports and ongoing policy uncertainty.
Exports dropped 1.2% from the previous quarter, matching the earlier estimate and confirming persistent pressure from international trade measures. Tariff actions by the United States continued to disrupt Japanese shipments and forced companies to adjust production plans. Trade officials noted that tariffs on autos created significant strain because the sector drives a major share of Japan’s export revenue.
Japan and the United States reached limited progress in easing tariff pressure during recent negotiations. The United States reduced its planned surcharge on Japanese imports to 15%, offering some temporary relief. However, Japanese automakers still faced substantial exposure to higher costs and shifting demand patterns. Government officials highlighted that Japan committed to a major U.S. investment package worth $550 billion in an effort to stabilize trade relations.
Private residential investment fell 8.2% in the quarter, though the revision showed a slightly smaller drop than earlier calculated. Economists linked the decline to updated building code requirements that slowed new construction and forced companies to adapt to stricter standards. This shift also contributed to volatility in housing starts throughout the year.
Imports slipped 0.4% during the quarter as firms reduced orders in response to slowing demand and tighter financial conditions. Private consumption recorded a modest gain of 0.2%, showing that household spending remained cautious despite stable employment levels. Economists noted that consumers showed greater sensitivity to rising prices and global uncertainty.
The updated data landed as Prime Minister Sanae Takaichi continued to promote her economic agenda. Her administration aimed to restore momentum through investment incentives and structural reforms. However, analysts said conditions remained too fragile to forecast a clear rebound. Many warned that external risks, including further trade tensions, could undermine near-term efforts.
Japan’s business community is now watching policy signals as the government prepares new measures to support growth. Economists expect continued volatility in upcoming quarters as domestic and global conditions evolve. Officials emphasized that they will monitor trade developments closely while assessing new strategies to stabilize the economy.
