Japan's economy lost momentum last quarter

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Japanese economic growth decelerated sharply in the September quarter.

According to preliminary estimates from Japan’s Cabinet Office, real GDP grew by 0.3%, decelerating sharply on the 0.6% pace of the previous quarter.

The result was in line with market expectations. It was also the seventh consecutive quarter that real GDP expanded.

The internals of the report were less impressive with domestic demand lopping 0.2 percentage points (ppt) off quarterly growth, masked by a 0.5ppt boost from external demand thanks to a strong lift in exports.

Private consumption, which accounts for around two-thirds of the economy, fell by 0.5%, larger than the 0.3% decline expected. It subtracted 0.3ppts from growth.

It was the first decline recorded since the final quarter of 2015, something the government said was influenced by adverse weather during the quarter.

Business Investment grew by 0.2%, lower than the 0.3% increase expected, helping to offset a decline in housing investment of 0.9%.

Public demand also declined, falling 0.6%. This subtracted 0.2ppts from growth.

Inventories added 0.2ppts, helping to boost domestic demand.

On a seasonally-adjusted annual basis, the economy grew by 1.4% over the quarter, slightly above expectations for an increase of 1.3%.

The economy previously grew by 2.6% in the June quarter.

There has been little reaction in financial markets to the report. The USD/JPY is flat for the session while the TOPIX in Tokyo is down 0.91%, reflecting strengthening in the yen on Tuesday and weakness in European and US stocks.

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