TOKYO, Nov. 11 (UPI) -- Japan's economy, hurt by slowing exports, shrank at an annualized 3.5 percent in the July-September quarter, the government said Monday.
The latest gross domestic product number represented a 0.9 percent contraction from the previous quarter. Japan is the world's third-largest economy after the United States and China.
The new numbers could bring more pressure on the government of Prime Minister Yoshihiko Noda, and calls for more stimulus measures, Kyodo News reported.
The news agency said the contraction was widely expected by private-sector analysts because of weakening of both domestic and external demand. Japan's economy was hit hard by the devastating earthquake and tsunami in March of last year.
Besides the continuing global slowdown, Japanese exports have also been affected by a rising yen and by the East China Sea island territorial dispute with China, which set off a number of violent anti-Japan protest in Chinese cities. China is a major trading partner of Japan and the territorial dispute already has begun to impact bilateral trade estimated at about $350 billion annually.
The New York Times quoted economists as saying they expect further contraction in the next quarter, triggering a recession.
"Although the Japanese economy will face harsh challenges for the time being, the situation is likely to bottom out by the end of the year," economists at the Mizuho Research Institute in Tokyo said in a note after the economic numbers were released.
But the economists also warned recovery could take longer if Japan-China relations deteriorate further, the U.S. newspaper said.
Japan's central bank has twice in the past two months eased its monetary policy under its asset lending program.
Kyodo News said Noda held talks Sunday with the Azuma Koshiishi, secretary-general of the ruling Democratic Party of Japan, but did not say anything about when he might call a general election, which must be held by next summer. The report said there is speculation Noda is exploring the possibility of dissolving the lower house by the end of the year.