Japan’s Q3 2025 Economic Snapshot

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Japan’s economy contracted in the third quarter of 2025, but the drop turned out to be less steep than expected. Real GDP fell by 1.8% year-on-year in the July-September period, versus forecasts pointing to around a 2.5% decline. On a quarter-to-quarter basis, GDP slipped by 0.4%  slightly better than the anticipated 0.6% drop. What’s worth noting: the contraction comes as the economy faces several headwinds  weak private consumption, sticky inflation and a downturn in external demand. Nevertheless, there are silver linings. Business capital expenditure (capex) picked up by 1.0% in Q3, up from 0.8% in the prior quarter, helping to cushion the overall output decline. In short: Japan didn’t grow, but the slide wasn’t as steep as feared  suggesting some resilience despite tough conditions.

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