by Tetsushi Kajimoto

TOKYO (Reuters) – Japan’s economy contracted between July and September, ending two consecutive quarters of expansion, driven by weakening demand.

The gross domestic product (GDP) of the world’s third-largest economy contracted by 2.1% in the third quarter, a much larger drop than the median expectations of economists, who expected a decline of 0.6% in annual.

This decline comes as the Japanese economy grew by 4.5% during the previous quarter.

This slowdown thwarts policymakers’ hopes that Japanese activity will rebound after the COVID-19 pandemic to compensate for weakening external demand.

Consumption fell slightly between July and September compared to economists’ estimates which expected growth of 0.2% in July-September compared to the previous quarter, after falling by 0.9% in April-June.

Investment spending fell 0.6% in the third quarter after a 1.0% decline in April-June.

External demand subtracted 0.1 percentage point from growth in the third quarter, in line with expectations.

(Report by Tetsushi Kajimoto; by Camille Raynaud)

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