Japan’s Economic Growth Falls Sharply as Exports Slow

TOKYO — Japan’s growth slowed to a crawl in the three months that ended in September, as a weakening global economy and trade conflicts threatened its fragile streak of economic expansion.

Japan’s economy — the third largest after the United States and China — grew at an annualized rate of 0.2 percent in the third quarter, according to data released on Thursday by the country’s Cabinet Office. The results were below the expectations of economists, who had predicted that growth would slow, but less quickly.

The performance was a sharp drop from the previous quarter, when the economy grew at a revised rate of 1.8 percent, a stronger-than-expected result that suggested the country’s economy was more resilient than many analysts had expected.

But the numbers on Thursday suggest that Japan may not be able to fend off looming threats to its growth for much longer.

Exports are plummeting, consumption is slowing and Japanese companies are facing a weak dollar, which erodes their profits and makes their products more expensive overseas.

So far, none of that has managed to derail the country’s economy, which — except for a quick dip into recession in 2014 — has shown slow, albeit steady, growth since 2012.

That growth was largely the result of two factors: a package of economic measures — loose monetary policy, heavy public investment and structural reforms — carried out by Prime Minister Shinzo Abe in 2012, and the meteoric rise of China’s economy.

Now, however, the easy policy steps have been taken, and China’s growth is slowing dramatically. That leaves Japan with very few options for shoring up its flagging economy.

The biggest problem for the country remains how to deal with an enormous slump in exports created by slowing global growth and the spillover effects of the trade war between the United States and China.

Exports from Japan have plummeted since last December, dropping more than 5 percent in September alone.

Much of that pain has come from China. The country is a major purchaser of Japanese machinery and components, which it uses to assemble finished goods to sell to the rest of the world.

But demand for Chinese-made products has fallen as tariffs from President Trump’s trade war bite. That means a smaller market for Japan’s industrial goods, and also fewer Chinese consumers buying popular Japanese products like cars, a trend that has been reflected in weak corporate earnings for Japanese companies over the past year.

The uncertainty caused by the United States-China trade conflict has also strengthened the yen against the dollar, making matters even worse for beleaguered Japanese firms, which have seen their profits shrink and the prices of their goods and services increase abroad.

Adding to the pain, a large number of South Korean consumers have boycotted Japan’s economy after Tokyo tightened controls on a wide array of exports to the country, citing national security concerns. The move — which Seoul says was driven by disputes over the legacy of Japan’s imperial past — inflamed public anger in South Korea and drove consumers to forswear Japanese luxuries from beer to spa vacations.

Despite all that, Japan’s economy has continued to defy concerns that it could teeter into recession. So far, it has managed to fend off threats from the Trump administration to slap potentially devastating tariffs on its auto industry, and even struck a mini-deal with the president on trade that — if approved by Japan’s Parliament — could add to its bottom line.

At home, relatively strong domestic consumption and business investment have buoyed growth.

Consumers rushed to purchase big-ticket items — a phenomenon known as front-loading — ahead of an October tax increase on most goods and services from 8 percent to 10 percent.

The new revenues are intended to help pay down the country’s enormous debt — almost two and a half times its annual economic output — and finance its growing public welfare costs as its population grays. But Mr. Abe repeatedly delayed the increase over concerns that the sudden jump in prices could damage the economy.

The government has estimated that the damage to economic growth will be less than half a percentage point — less severe than that caused by the previous increase in 2014, which incited a short recession. And policymakers have tried to dull that impact by offering incentives on the purchases of houses and cars and offering up to 5 percent refunds on certain purchases made with electronic payment systems — part of the country’s efforts to move its consumers away from cash.

But it is not yet clear whether those measures will mitigate the potential damage to the economy from the tax increases, which, based on the weak growth figures on Thursday, could be enough to push the country into contraction.

“Despite the fact that third-quarter growth was weaker than expected and, on the surface, doesn’t seem to show much front-loading impact from the tax hike, we saw a sizable drop in consumer spending in October,” said Izumi Devalier, the chief Japan economist at Bank of America Merrill Lynch, adding that the numbers suggested that the hangover from the tax rise could be larger than initially anticipated.

Mr. Abe is unlikely to take that chance. The country’s economic recovery is his most important achievement, and the results released Thursday will put additional pressure on him to look for economic stimulus measures to ensure the country does not slip into recession.

Last week, he ordered his cabinet to put together a package of measures to ensure growth continues, including allocating recovery funds for the devastating typhoon that struck Japan last month.

That could help avoid the worst, Ms. Devalier said.

“Public investment is already growing,” she said, adding that the “contribution will be sustained due to the government’s additional fiscal stimulus.”