The drop in exports under US tariff pressure produced the first contraction in six quarters, government data showed on Monday.

Automobile shipments plunged after a rush to export ahead of the tariff hikes.

The downturn was milder than economists expected, suggesting a temporary setback rather than a recession.

“The contraction is largely due to one-time factors such as housing investment,” economist Kazutaka Maeda of Meiji Yasuda Research Institute said.

“Exports also reacted,” he said.

He added that underlying momentum remains weak, though a gradual recovery is still projected over the next one to two years.

Most economists said the GDP data would have only a marginal effect on Bank of Japan rate decisions compared with inflation trends.

But an economist close to Prime Minister Sanae Takaichi assigned greater weight to the figures.

Given the contraction, “it would be misguided for the BOJ to decide to raise interest rates” in December, Credit Agricole chief Japan economist Takuji Aida said in a report to clients.

Japan’s gross domestic product fell 1.8% in July-September.

That followed revised growth of 2.3% in the previous quarter and was better than the 2.5% contraction expected in a Reuters poll.

The quarterly decline came to 0.4%, against a median estimate of 0.6%.

Exports were the main drag as the impact of higher US tariffs intensified.

Automakers saw shipment volumes plunge, reversing earlier front-loaded exports, and absorbed much of the tariff cost through price cuts.

Net external demand subtracted 0.2 percentage point from growth, compared with a 0.2 point contribution in April-June.

Washington and Tokyo formalized an agreement in September imposing a baseline 15% tariff on nearly all Japanese imports, down from the initial 27.5% on autos and 25% on most other goods.

The deal still left Japan absorbing an economic hit driven by US protectionism.

Housing investment weighed on growth as tighter energy-efficiency rules introduced in April slowed commitments.

Private consumption, over half of economic output, grew 0.1%, matching forecasts.

That was weaker than the second quarter’s 0.4%, reflecting pressure from elevated food costs.

Capital spending rose 1.0% in the third quarter, far above the market estimate of 0.3%.

“Private consumption rose for the sixth straight quarter, and capital expenditure increased for the fourth consecutive quarter,” economic revitalization minister Minoru Kiuchi said.

“This reinforces our view that the economy remains on a moderate recovery path,” he said.

Private-sector forecasts expect a rebound in October-December.

A Japan Center for Economic Research poll of 37 economists projected 0.6% growth.

The weak GDP report comes as Takaichi’s government prepares a stimulus package to ease the strain of rising living costs.

Advisers have cited the sharp GDP contraction as justification for aggressive measures.

Finance Minister Satsuki Katayama said proposed stimulus would exceed 17 trillion yen ($109.94 billion), according to media reports.

“From late this winter through around spring, there will be measures that improve households’ income conditions in real terms,” Nomura Securities economist Uichiro Nozaki said.

“Therefore, in terms of underpinning consumption in the first half of next year, this is a positive factor.”