Japan's Economy Faces Deeper Contraction Amid Stimulus Efforts

Japan's economy contracted at an annual pace of 2.3% in the July-September period, according to a report from the government released on Monday. This decline translates to a 0.6% on-quarter fall and marks a lowered revision from preliminary data, which initially showed a drop of 1.8% at an annual rate or 0.4% on-quarter, as reported by the Cabinet Office.

Exports suffered a drop of 1.2% in the quarter compared to the previous quarter, remaining unchanged from the preliminary figure, while private residential investment fell by 8.2%, slightly less severe than the 9.4% fall indicated in earlier data.

The economic downturn is attributed to the impact of U.S. President Donald Trump's tariffs and a slip in public investments. In September, the U.S. reduced the tariffs surcharge on nearly all Japanese imports to 15% from an initially planned 25%.

Tariffs on autos have been a significant blow to Japan's economy. Japan has pledged to invest $550 billion in the United States as part of negotiations surrounding these tariffs. Analysts suggest the decline in private residential investment observed in the July-September quarter stems from revisions to Japan's building code that led to a plunge in housing starts earlier this year.

Imports fell by 0.4% during the quarter, while private consumption saw a slight gain of 0.2%, according to revised data. The tariffs have strained Japan's bilateral ties with the U.S., its key ally. Japan's new Prime Minister, Sanae Takaichi, who is the country's first female prime minister, remains popular due to her assertive nationalist comments and is working towards economic revival, although prospects remain uncertain.