Japanese economic contraction in Q3 2025-Japan’s economy contracted less than expected in the third quarter, with GDP falling 0.4% quarter-on-quarter versus forecasts for a 0.6% decline. On an annualised basis, output shrank 1.8%, also better than the expected 2.5% drop, as a soft global backdrop and sluggish domestic conditions continued to weigh on activity.GDP q/q preliminary -0.4%expected –0.6%, proir 0.5%- GDP Annualised -1.8%expected –2.4%, prior 1.6%The breakdown showed a mixed picture:Private consumption — roughly half of Japan’s economy — barely grew, rising just 0.1%, exactly in line with expectations and highlighting households’ ongoing caution in the face of still-elevated prices:expected 0.1%, prior 0.4% Capital expenditure, however, provided a rare bright spot, expanding 1.0% and beating the 0.3% consensus as firms continued to invest despite weaker demand:expected 0.3%, prior 0.6%External demand remained a drag. Net exports shaved 0.2 percentage points off growth, with exports down 1.2% quarter-on-quarter amid global softness and the lingering impact of trade tensions:expected -0.2%, prior 0.3%Domestic demand also subtracted 0.2 points, illustrating how both internal and external engines of growth stalled simultaneously.The GDP deflator rose 2.8% year-on-year, underscoring persistent underlying inflation as the Bank of Japan assesses whether price gains are durable enough to justify further policy normalisation:expected 2.8%, prior 3.0% This article was written by Eamonn Sheridan at investinglive.com.