Japan's economy contracted less than expected in the third quarter of 2025, preliminary estimates released by the Cabinet Office showed Monday.
Japan's seasonally adjusted gross domestic product contracted 0.4% quarter-on-quarter in the three months through to September, following an upwardly revised 0.6% increase in the previous quarter.
The latest reading was better than the minus 0.6% FXStreet consensus forecast, but stood out as the first contraction since the first quarter of 2024.
Meanwhile, GDP fell 1.8% on an annualised basis in the third quarter, compared to a forecasted 2.5% decline and after a 2.3% increase in the previous quarter.
The Cabinet Office report revealed that the decline was driven by a drop in private demand as private residential investment fell during the period, with economic growth further hindered by a slump in the exports of goods and services amid the ongoing US tariff policy.
Norihiro Yamaguchi, lead economist at Oxford Economics, said: "We believe the strong decline in residential investment reflects a one-off decline in housing starts, largely driven by the recent amendments to the Building Standards Act.
"Despite a dip in GDP in Q3, we maintain our view that the economy will gradually improve in 2026. Consumption should improve modestly, supported by moderate gains in households' real incomes."