Japan’s economy slows, logging 0.2% annual expansion in 3Q

Japan’s ecomy grew at a modest annual pace of 0.2% in July-September, supported by consumer purchases ahe of a tax hike, government said Thursday.

It was fourth straight quarter of expansion for world’s third-largest ecomy, but well below analysts’ forecasts.

Exports were a drag on growth. Inventories also declined. But government spending helped support demand, expanding by 2.4%.

Tre tensions between China and U.S. and between Japan and South Korea have weighed on export demand that alrey was weakened by slowing global growth.

quarterly rate of growth was 0.1%, down from a revised 0.4% in April-June.

An increase in national sales tax to 10% from 8% as of Oct. 1 is expected to drag growth lower in last quarter of this year.

Past tax hikes have been followed by recessions, but ecomists say modest bump in spending ahe of this latest increase suggests that spending and growth may t fall by as much this time around, said Stefan Angrick of Oxford Ecomics.

However, he said, “we caution against overly optimistic expectations for household spending after tax hike as ws remain weak. external outlook also remains vulnerable.”

In 2020, ecomy is expected to get a small lift from Tokyo Olympics and Paralympics, ted Naoya Oshikubo of Sumitomo Mitsui Trust Asset Manment.

He said corporate investments would likely also rise thanks to need for equipment to help make up for shorts of labor.