The Japanese economy contracted much faster than expected in the third quarter, as global supply disruptions hampered exports and business spending plans and new COVID-19 cases soured consumer sentiment.
While many analysts expect the world’s third-largest economy to recover in the current quarter as virus restrictions ease, worsening global production bottlenecks pose increasing risks to Japan’s export-dependent economy.
The economy shrunk by 3.0 percent year on year in July-September, following a 1.5 percent growth in the first quarter, according to provisional GDP data released on Monday, far worse than the 0.8 percent contraction predicted by the market.
The dismal GDP report contrasts with more encouraging data from other advanced countries where the economy expanded 2.0 percent in the third quarter due to significant pent-up demand.
Despite supply shortages and new COVID-19 limits, manufacturing output and retail sales in China unexpectedly increased in October, according to data released on Monday.
GDP declined 0.8 percent quarter over quarter, contrary to market expectations of a 0.2 percent drop.
Economists say that Japan’s substantial reliance on the auto industry made the economy more sensitive to trade disruptions than other countries.
According to Shinichiro Kobayashi, principal economist of Mitsubishi UFJ Research and Consulting, automakers account for a major portion of Japan’s manufacturing sector, affecting a wide range of subcontractors.
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