Asia stocks drop amid weak Japan GDP

GDP declined 1.8% in the July-September period, but was better than forecasts for a 2.5% drop

Most Asian stocks edged lower on Monday, with Japan on the backfoot after data showed the economy dipped sharply in the third quarter, albeit less than expected.

Nikkei 225 and TOPIX indexes dropped 0.6% each on Monday, after gross domestic product data showed Japan’s economy dropped at its worst pace since the second quarter of 2024.

GDP declined 1.8% in the July-September period, but was better than forecasts for a 2.5% drop.

The decline was driven chiefly by weak private consumption and a drop in exports. Strong capital expenditure, however, offered some support to GDP.

The GDP data dampened bets that the Bank of Japan will hike interest rates in December, a notion that helped limit overall losses in Japanese shares.

But Capital Economics analysts said signs of sticky inflation and relatively strong growth still kept bets on a January rate hike alive.

Japanese and Chinese stocks also pulled back amid a growing diplomatic row between Beijing and Tokyo.

Shanghai Shenzhen CSI 300 and Shanghai Composite indexes dropped 0.7% and 0.6%, respectively, while Hang Seng index slipped 0.5%.

China over the weekend warned its citizens against visiting Japan, as relations between the two countries soured over Taiwan.

China’s guidance sparked sharp losses in Japanese tourism stocks.

The row was largely over comments made by Japanese Prime Minister Sanae Takaichi on Taiwan. She said last week that a Chinese attack on Taiwan could cause a “survival-threatening situation,” hinting at a military response from Tokyo.

Takaichi’s comments had drawn a sharp rebuke from Beijing.

KOSPI, which was among the worst hit by this trend, bounced back sharply on Monday with a 1.7% rise. Data also showed South Korea’s exports growing steadily in October, while imports declined.

Among other Asian stocks, ASX 200 shed 0.3%, while Singapore’s Straits Times index slid 0.1%.