Japanese Economy: Despite negative growth, domestic demand remains resilient.

■ Although Japan's GDP declined in July-September, continued increases in equipment investment and personal consumption suggest that overall domestic demand stays strong. 

■ Core price increases persisted, and while government measures will help control overall inflation in the future, there is still strong upward pressure on prices. 
 
   The preliminary estimate for real GDP in July-September showed a 1.8% annualized decline quarter-on-quarter, marking the first negative growth in six quarters. Residential investment (down 32.5% year-on-year) fell sharply due to the fading buying frenzy after energy efficiency standards were revised, coupled with exports (down 4.5% year-on-year) entering an adjustment phase following strong growth earlier in the year—both significantly dragging down GDP. Residential investment alone reduced the growth rate by 1.4 percentage points, while net exports decreased it by about 1 percentage point. However, excluding these factors, growth for the previous three quarters has been revised upward, and both equipment investment (up 4.2% year-on-year) and personal consumption (up 0.6% year-on-year) continued to grow in July-September, indicating domestic demand remains robust. 

 
   In October, the national Consumer Price Index (CPI) showed increases for both the core CPI (excluding fresh food, up 3.0% year-on-year) and the core CPI (excluding fresh food and energy, up 3.1% year-on-year). Prices for goods and services increased across the board. In addition to rising durable goods prices, insurance premiums rose further due to price adjustments, and accommodation costs surged, driven by strong travel demand to Japan. Although government price control measures are expected to significantly slow CPI growth in 2026, upward pressure on fundamental prices should not be overlooked.