Natural disasters hit Japan’s economic growth

Japan’s economy contracted in the third quarter, hit by natural disasters and a decline in exports, a worrying sign that trade protectionism is starting to take its toll on overseas demand.

The 1.2 percent annualized contraction in July-September was more than the median estimate for 1.0 percent growth in annual terms. It followed a robust 3.0 percent annualized growth in the previous quarter.

A devastating earthquake and typhoon were among the disasters to hit Japan this year and prompted the bigger than expected contraction.

The slowdown also comes as the US and China fight a trade war which risks hurting global trade and growth. Economists polled by Reuters had forecast a 1% contraction for the three months to September.

Exports fell 1.8% from the previous quarter, the fastest decline in more than three years. Japan was hit by several natural disasters over its summer, including one of the country's worst flooding disasters in decades, an earthquake and a deadly typhoon.

The disasters disrupted factories and hit domestic spending. Rising trade tensions and protectionism could be a drag on future growth. The US-China trade war could hit Japan particularly hard because of its important role in the global supply chain.

Exports of car parts, electronics, and industrial machinery are at risk of disruption if the trade battle escalates.

"Trade war uncertainties have begun to increase, we see some slowdown in Asia and that is gradually hitting Japan," Kohei Iwahara, economist at Natixis Japan Securities, said.