World Economy

Japan's economic growth slows in Q3

Pedestrians cross a street in the Ginza district of Tokyo.
Akio Kon | Bloomberg | Getty Images

Japan's economy grew 0.5 percent in the third quarter from the previous one, slowing from a 0.9 percent expansion in the April-June period amid weakness in exports and as consumer spending eased, data on Thursday showed.

On an annualized basis, Japan's economy grew 1.9 percent, just above expectations for a rise of 1.7 percent.

(Read more: Japan set for third-quarter blip but won't last long)

Japan has pumped money into its economy this year and embarked on aggressive monetary stimulus to end deflation and revive the growth prospects for the world's third largest economy.

(Read More: Will 2% inflation be enough for Japan?)

Martin Lakos, division director at Macquarie Private Wealth, pointed out that although the Q3 number was a decline on the previous quarter, it still beat expectations.

"You've got this Japanese GDP data coming through, and I know it's only one quarter but it's beat expectations. Maybe this tenacious move by Abe and the Bank of Japan is starting to gain some traction," he said.

Takuji Okubo, principal, chief economist at Japan Macro Advisors told CNBC Asia's "Squawk Box that sluggish growth in the global economy was likely to continue to take its toll on Japan in the coming quarters.

"The International Monetary Fund (IMF) has been downgrading the global growth for the past one-and-a-half years. So it will be difficult even with a weak yen for Japan to increase their volumes [of exports]," he said.

(Read More: Is the euro zone at risk of Japan style deflation?)

Japan wage increase crucial for growth: Pro

However, Okubo added that despite the lackluster export numbers, he still considered Japan's third quarter growth to be "robust" and expected the economy to grow at similar levels in the final quarter of 2012, and in the first quarter of next year.

"For the next two quarters, Japan should be able to enjoy robust growth, there will be smooth sailing for the next two quarters. But I do expect Japan to experience a significant slowdown after April," he said, referring to the impact of the planned consumption tax hike to 8 percent from 5 percent in April.

(Read More: The verdict on Abenomics, one year on)

Okubo said wage increases were key for underpinning consumer spending and improving Japan's long-term economic outlook.

"Eighty or 90 percent of Japanese companies are not thinking of any rise in regular wages. I do expect there could be some companies that could be nice to employees but overall, wages are not going to rise in Japan and households will face a negative real wage growth," he said.

(Read More: Are the starsre-aligning for dollar-yen?)

Japanese markets appeared to shrug off the data with the Nikkei climbing 0.7 percent in early trade.

—By CNBC'sKatie Holliday: Follow her on Twitter @hollidaykatie