FILE PHOTO: City skyline and harbour are seen at sunrise from a bus window in Tokyo, Japan July 24, 2021. REUTERS/Maxim Shemetov/File Photo

By Satoshi Sugiyama

TOKYO, Dec 8 (Reuters) - Japan's economy contracted faster than initially estimated in the three months through September, primarily due to new data dragging down capital spending figures, though economists said the blip is not enough to sway the central bank.

Gross domestic product shrank an annualised 2.3% rather than 1.8%, the Cabinet Office said on Monday, the quickest rate since the third quarter of 2023.

Economists on average had estimated 2.0%, saying the contraction was likely to be reversed in the next quarter and that the revised figures would have minimal impact on the Bank of Japan's next interest rate decision.

The BOJ is likely to raise its policy rate at its December 18-19 meeting and the government is set to tolerate the decision, sources told Reuters.

"The results wouldn't significantly change the overall assessment of the economy," said economist Uichiro Nozaki at Nomura Securities. "Expectations for a rate hike in December have risen considerably, and that's largely because of strong prospects for next year's spring wage talks. The path (to normalise monetary policy) is unlikely to change."

On a quarter-on-quarter basis, GDP contracted 0.6%, compared with analysts' estimate of 0.5% and an initial reading of 0.4%.

NEW REGULATIONS WEIGH ON HOUSING INVESTMENT

Private consumption, which accounts for more than half of the economy, inched up 0.2% in July-September rather than 0.1% after reflecting data on dining out, the revised figures showed.

The capital expenditure component of GDP, a barometer of private demand, fell 0.2%, after incorporating the most up-to-data. The initial estimate was a 1.0% rise and economists had estimated an uptick of 0.4%.

External demand - or exports minus imports - knocked 0.2 percentage points off growth, unchanged from the preliminary reading. Domestic demand shaved off 0.4 percentage point, compared with 0.2 percentage point in the initial data release.

In September, the United States formalised a baseline 15% tariff on nearly all Japanese imports, having initially intended to impose 27.5% on autos and 25% for most other goods.

Housing investment contracted due to tighter energy-efficiency regulations introduced in April. Still, its contraction narrowed to 8.2% from the preliminary reading of 9.4%.

Looking ahead, economists said the world's fourth-largest economy is likely to return to growth in the next quarter, anchored by a slow recovery in private consumption, though U.S. tariffs are likely to pressure exports.

"As for capital investment, although demand for digital and labour-saving investment is strong, deteriorating corporate earnings will intensify downward pressure, so the pace of increase will likely remain moderate," said senior economist Masato Koike at Sompo Institute Plus.

(Reporting by Satoshi Sugiyama; Editing by Chang-Ran Kim and Christopher Cushing)