Japan’s economy contracted by a smaller-than-expected 0.4% in the quarter ended September compared to the previous three months.

Economists polled by Reuters had expected a 0.6% decline.

On an annualized basis, Japan’s GDP for the third quarter of 2025 fell 1.8%, a softer decline compared with estimates of a 2.5% contraction.

Exports of goods and services shrank 1.2% compared to the second quarter, a reversal from the 2.3% climb in the previous three months. Net exports contributed to a 0.2 percentage point drop in GDP.

Private demand proved to be the largest drag on GDP this quarter, declining 0.4% compared to the quarter before and pulling GDP down by 0.3 percentage point.

Public demand was a bright spot however, increasing 0.5% quarter on quarter and contributing 0.1 percentage point to the Japanese economy.

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