Japan's economy unexpectedly shrinks in July-September amid inflated imports costs, yen's slide

TOKYO, Nov. 15 (Xinhua) -- Japan's economy unexpectedly shrank for the first time in four quarters in the July-September period, as the yen's tumble to decade lows further inflated soaring import and living costs, the government here said Tuesday.

According to the Cabinet Office, the economy contracted an annualized 1.2 percent in the recording period, with the shocking decline compared to median economists' expectations for growth of 1.1 percent on the heels of a revised 4.6 percent expansion logged in the second quarter.

Real gross domestic product, or the total value of goods and services produced in a country adjusted for inflation, dropped 0.3 percent from the previous quarter, compared to median economists' forecasts for growth of 0.3 percent, the Cabinet Office also said.

The data showed that the country's imports by far outpaced exports in the recording period, with imports leaping 5.2 percent compared to exports rising 1.9 percent.

Global inflation has been pushing up the costs for resource-poor Japan to obtain energy products including liquified natural gas, and other raw materials.

The government here in some cases has tried to prevent the increased costs from being passed on to consumers or attempted to offset the costs by implementing anti-inflation measures.

Japanese Prime Minister Fumio Kishida's government, in a bid to tackle the downside effects of cost-push inflation, has instituted 29 trillion yen (206.72 billion U.S. dollars) in extra spending in the budget.

The government has also formulated an inflation-relief package announced in September, that includes a 50,000 yen (356 U.S. dollars) cash handout program for low-income households, along with systems to keep gasoline and imported wheat prices at current levels.

Despite such measures, higher costs, in growing instances, have been passed on by retailers to consumers, leading private consumption here to rise slightly yet remain pressured looking ahead.

Private consumption edged up 0.3 percent in the third quarter, fractionally higher than a 0.2 percent increase forecast by economists, but significantly lower than the 1.2 percent growth booked in the second quarter, the office's data showed.

The yen dropping to 32-year lows against the U.S. dollar, meanwhile, which has further inflated import and living costs, has been caused by a widening interest rate gap between the Bank of Japan (BOJ) and other central banks, including the U.S. Federal Reserve.

The BOJ has maintained its ultra-easy monetary policy, believing the global inflation crisis to be transitory. This is in stark contrast to hefty rate hikes being implemented by the BOJ's global peers in a bid to tame rampant, global inflation.

The Cabinet Office also said that capital investment increased by 1.5 percent in the recording period, as firms proactively spent as means to increase output, including building new facilities such as factories, notably ones to produce chip-related products.

Looking ahead, economists' consensus is that in the first half of 2023, Japan will slip into a mild recession amid a global slowdown that will hit the country's exports.