Japan’s economy shrank at an annualised rate of 1.8 per cent in the latest quarter, as US tariffs hit exports and housing investment plunged ahead of a major stimulus package expected this month to boost the struggling economy.

The decline in real GDP for the July to September period was less severe than economists’ median forecast of a 2.5 per cent fall, but the contraction was the first in six quarters. It came at a critical juncture as the country awaits the new government’s spending plans and the central bank weighs raising interest rates.

Japan’s Prime Minister Sanae Takaichi came to power in October with a pledge to help households struggling with rising living costs. She is expected to unveil a significant stimulus package as soon as this week aimed at boosting Asia’s largest developed economy.