Japan's economy shrinks as inflation takes toll

STORY: The economy of Japan has unexpectedly shrunk, no thanks to a weak yen and fears of a global recession.

GDP for the three months until September slipped into reverse by 1.2% annually, according to data out Tuesday.

It’s the opposite of what economists forecast, a 1.1% expansion.

It translates into a quarterly decline of 0.3%, where it was expected to grow at about that rate.

Inflation has hit Japan’s currency hard. The yen is now at a 32-year-low against the dollar.

It’s pushed up the price of everything from fuel to food, and thrown cold water on Japan’s recovery from the global health crisis.

It’s made worse by sweeping interest rate hikes, and the Ukraine war.

Japanese Economy Minister Shigeyuki Goto said monetary tightening in the West could deal a blow to Japanese households and businesses.

Last month, Prime Minister Fumio Kishida put together a stimulus package of 29 trillion yen, or close to $200 billion dollars, to dull the pain.

Private consumption makes up more than half of the Japanese economy, but it grew only 0.3% in the third quarter.

That was a sharp slowdown from the second quarter’s 1.2% gain.

Exports shot up, but were overtaken by hefty gains in imports – taking a bite of 0.7 percentage points out of Japan’s GDP.