Japan's economy in the July-September period shrank a real 0.8 percent from the previous quarter, or an annualized 3.0 percent, amid a COVID-19 state of emergency as well as slow car sales and exports due to global chip and parts shortages, government data showed Monday.
The nation saw the first decrease in two quarters in real gross domestic product, or the total value of goods and services produced in the country adjusted for inflation, following growth of 1.5 percent in the previous quarter, according to the preliminary data released by the Cabinet Office.
The GDP figure was worse than private-sector economists' average projection of a 0.6 percent annualized contraction, with the government's latest projection of a rebound to a pre-pandemic level by year-end from its worst slump on record last year becoming less likely.
Consumer spending fell 1.1 percent, down for the first time in two quarters, as expenditures on services including trips and dining out remained sluggish under the government's months-long virus emergency, which was fully lifted nationwide on Oct. 1.
With the aim of curbing a coronavirus resurgence driven by the highly contagious Delta variant, the emergency targeted 21 out of Japan's 47 prefectures at one point, requesting people to stay home and restaurants and bars to close early and to refrain from serving alcohol.
Household spending on vehicles was weak as automakers were forced to cut output since around the summer amid a worldwide semiconductor shortage and parts supply disruption resulting from virus infection surges in Southeast Asian nations. Purchases of home appliances were also weak.
The reduced auto production also led business investment, another key pillar of domestic demand, to decrease 3.8 percent as firms bought fewer cars on the back of the fall in output. The auto production woes caused exports to decline 2.1 percent, the first fall after four quarters of growth driven by solid car exports, a government official told reporters.
The Tokyo Olympics and Paralympics in the summer failed to boost spending by domestic travelers as well as that by overseas visitors, the latter which contributes to Japan's export numbers, as the international sports events were held without spectators at most venues under the pandemic.
Imports fell 2.7 percent, reflecting lackluster domestic demand and sluggish imports of car parts which helped boost GDP to some extent, according to the official.
Private housing investment sank 2.6 percent partly due to a global lumber shortage and related soaring prices for the building material.
Government spending rose 1.1 percent, underpinned by the nation's COVID-19 vaccination campaign along with supportive measures such as financial aid for the medical sector fighting the pandemic and virus-hit businesses. Public investment was down 1.5 percent.
The Cabinet Office has estimated that Japan's GDP will return in 2021 to its "pre-pandemic level," defined as its size in October-December 2019. The annualized size of real GDP for the 2021 third quarter was 534.71 trillion yen ($4.7 trillion), while that for the fourth quarter in 2019 was 546.96 trillion yen.
In nominal terms, or unadjusted for price changes, the economy contracted 0.6 percent, or an annualized 2.5 percent, in the reporting quarter.
Revised GDP data is scheduled to be released on Dec. 8.