Japanese growth slowed significantly in the third quarter of the year, according to government data released today, sparking concerns for the health of the world's third-biggest economy.
The economy expanded 0.1% in the three months from July and September, a slowdown from the 0.4% seen in the previous period, and much weaker than economists had forecast.
A drop in exports amid ongoing global trade tensions outweighed growth in domestic demand, the government said.
Analysts had expected a stronger pace of growth in the third quarter as consumers rushed to make purchases before a consumption tax hike from 8% to 10% on October 1.
Japan's household spending surged 9.5% year-on-year in September, according to official data released last week, as consumers rushed to complete purchases of furniture and other big-ticket items ahead of the rate rise.
But analysts said the pre-tax shopping spree was not that strong, which suggested that the Japanese economy is not strong enough to maintain a sustainable recovery.
They predicted the economy would go into reverse in the fourth quarter as consumption slows after the tax hike.
Weak exports partly reflected worries over the US-China trade war, but if the fourth round of tariffs (by the US) is pushed back as expected, they will likely pick up.
A slowdown in the IT sector is in the process of bottoming out, which could provide a pep to the economy in the fourth quarter.
Prime Minister Shinzo Abe's government twice delayed implementing the hike over fears it could hit the country's fragile economic growth.
But despite speculation of a further delay, the hike went ahead as planned on October 1.
Fears that the move could cause a recession have receded somewhat in recent months, and the government insists the increase is necessary to fund key policy priorities.
But historically, tax hikes have hit Japan's economy hard.
Both of the most recent increases - from 3% to 5% in 1997 and then to 8% in 2014 - were followed by recessions.
However, Naoya Oshikubo, senior economist at Sumitomo Mitsui Trust Asset Management, forecast that the Japanese economy would ride out the storm next year as it receives a likely boost from the Tokyo Olympics.
"Looking ahead to 2020, we believe the Japanese economy should remain resilient on the back of a concerted global economic recovery as central banks worldwide continue to maintain monetary policies geared towards easing," he said.
A solution to the US-China trade tensions should further boost Japanese exports, he added.
On a year-on-year basis, the economy grew by 0.2%. Analysts had expected an expansion of as much as 1%.