Japan's economy contracted an annualized real 1.8 percent in the third quarter of 2025, marking the first contraction in six quarters, preliminary government data showed Monday.

Quarter-on-quarter, real gross domestic product (GDP), adjusted for inflation, in the July-September period declined 0.4 percent from the previous three months, according to the Cabinet Office.

The shrinkage in GDP was widely expected, as the Japanese economy grappled with sticky inflation, sluggish private spending and higher U.S. tariffs.

Exports decreased 1.2 percent from April-June while imports were down 0.1 percent. As a result, external demand, or exports minus imports, subtracted 0.2 percentage points from the GDP, accounting for half the decline.

Among other key components, private consumption, which accounts for more than half of economic output, inched up 0.1 percent while corporate investment increased 1.0 percent.