Japan’s economy showed signs of recovery in the third quarter, with real gross domestic product (GDP) expanding 0.3% year-on-year, ending two consecutive quarters of decline. The GDP reading marked a reversal from the revised 1.1% decline seen in the second quarter.
On a quarter-on-quarter basis, GDP rose 0.2%, lower than the 0.5% growth in the second quarter, but still in line with Reuters poll estimates. On an annualized basis, the economy expanded 0.9%, beating estimates of a 0.7% expansion, though this was a sharp decline from the 2.9% rise in the previous quarter.
The data comes against the backdrop of the Bank of Japan (BOJ) raising interest rates from 0.1% to 0.25% in July, the highest level since 2008. Higher policy rates generally cool the economy, and the BOJ has stated that it will continue to raise rates “if economic activity and prices develop as expected.” Following the GDP data release, the benchmark Nikkei 225 rose 1.28%, while the broad-based Topix climbed 0.96%. The Japanese yen, however, weakened 0.29% against the U.S. dollar after the announcement.
