Real gross domestic product (GDP), the total value of goods and services produced in Japan adjusted for inflation during the third quarter, decreased 0.5 percent from the April-June quarter, according to preliminary figures by the Cabinet Office.
Wednesday's data was worse than economists' estimate of an annualized 0.42 percent shrinkage, as lackluster consumption and capital investment dragged on the economy.
Private consumption fell 0.04 percent in July-September, dropping for the second quarter in a row, as inflation continued to bite in recent months.
Business investment also contracted 0.6 percent, after declining 1.0 percent in April-June, suggesting that companies continued to cut back on capital spending amid price hikes.
Imports, whose growth impacts GDP negatively, expanded 1.0 percent, a rebound from a sharp drop of 3.8 percent in the previous quarter, while exports grew 0.5 percent.
Japan's economy grew a revised 3.7 percent in the first quarter and a revised 4.5 percent in the second quarter on an annualized basis.
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