Tokyo said the economy contracted 0.8 percent in July-September, compared with an earlier estimate of 1.2 percent.
Japan’s economy, the world’s third-largest, shrank slightly more than expected in the third quarter, bolstering views that it is slowly recovering from COVID-19 as major export markets showed some signs of weakness.
Diversified that the economy posted its first current account deficit in eight years in October, reflecting rising housing and business prices on the yen’s depreciation to a ten-year low this year.
The revised 0.8% annual gross domestic product (GDP) data released by the Cabinet Office on Thursday compared with economists’ forecasts of a 1.1% annual decline in a Reuters poll and an earlier estimate of a 1.2 percent decline.
The revision was driven by changes in private equity and compared to a 4.5% year-over-year gain in the previous quarter.
Japan’s economy shrank sharply in the third quarter as the global recession, China’s economic slowdown, a weak yen and rising import prices hurt consumption and business.
The economy could increase in the current sector due to the easing of restrictions on electronics and vehicles, as well as the lifting of the COVID-19 restrictions, boosting tourism, some experts said.
However, some are looking for the global economy to collapse next year, which will hurt Asian exporters that depend on trade such as Japan.
“The resumption of tourism and the domestic travel promotion campaign will boost private consumption, helping the economy return to growth in the October-December quarter,” said Takeshi Minami, an economist at the Norinchukin Research Institute.
“Going forward, the global slowdown led by rising economic growth and the collapse of China’s retail sector will affect the Japanese economy, possibly leading to a slowdown in technology, or two straight sectors in the first half of next year.”
Less than a year later, third-quarter GDP was down 0.2 percent from the previous quarter, compared to an earlier estimate of 0.3 percent. Researchers were expecting a drop similar to the original reading.
Among the key sectors, private consumption, which makes up more than half of Japan’s GDP, contributed to growth, albeit in a revised fashion. Imports and exports were another contributor to growth.
However, a weaker yen and lower inflation, which boosts the cost of living, more than contribute to GDP growth.
A surge in energy and other imports led to Japan’s current account deficit of 609.3 billion yen ($4.45bn) in October, Finance Ministry data showed. This was the first decline since March 2014.
Before the climate change, October’s current account deficit stood at 64.1 billion yen, the first decline since January.
The Bank of Japan’s latest Tankan business survey showed that sentiment among manufacturers rose sharply in the three months to September, as rising commodity prices weighed on prospects for a faltering economy.
Manufacturing sentiment to resume recovery remained flat, while the manufacturing sector saw conditions worsen, a monthly Reuters poll found on Wednesday.