Consumer and business spending both contracted, and Japan's economy shrank faster than expected in Q3

　　Revised data on Friday showed Japan's (JPN) economy shrank at a faster pace than initially estimated in the third quarter, complicating the Bank of Japan's efforts to phase out its easy monetary policy.

　　Both consumer and business spending contracted, pushing gross domestic product down in the third quarter. Separate data showed real wages and household spending continued to fall in October as chronic inflation dampened shoppers' enthusiasm.

　　Toru Suihiro, chief economist at Daiwa Securities, said: "The weakness in personal consumption is likely to persist for the foreseeable future as real disposable income is likely to continue to decline, which is seen as one of the factors leading to sluggish consumption."

　　Revised data released by the Cabinet Office showed growth fell 2.9 percent on an annualized basis in the July-September period, worse than an initial reading of a 2.1 percent contraction and market forecasts for a 2.0 percent decline.

　　Capital spending fell 0.4 percent, compared with a preliminary reading of a 0.6 percent decline and a median market forecast for a 0.5 percent decline. Private consumption, which accounts for more than half of the economy, fell 0.2 percent in July-September, compared with a preliminary reading of being flat. External demand contributed negative 0.1 percentage points to real GDP, the same as the initial estimate, as imports of services outpaced exports of automobiles.

　　Separate data from the health ministry showed real wages, adjusted for inflation, fell 2.3 per cent in October from a year earlier, falling for the 19th straight month, although the decline narrowed from 2.9 per cent in September.

　　Although nominal wages rose by 1.5 per cent, real wage growth was wiped out by inflation of more than 3 per cent. Real wage growth is a measure of consumers' purchasing power. Household spending fell 2.5 per cent in October from a year earlier, the eighth straight monthly decline, as incomes stagnated, data from the Ministry of Internal Affairs and Communications showed.

　　The Bank of Japan has stressed the need to maintain ultra-low interest rates until inflation reaches 2 per cent on a sustained basis and wages rise. Bank of Japan Governor Kazuo Ueda said on Thursday that the outlook for wages next year is crucial to determining whether prices are on the right track.