Japan’s economy continues to grow but at slower pace

Japan’s gross domestic product expanded 0.2% in the three months to September from the previous quarter, preliminary government data showed Friday.

That matched the forecast in a poll of economists by data provider Quick. The economy grew 0.5% in the April-June quarter, swinging back to growth after a first-quarter contraction.

Although the pace of expansion in the latest quarter was mild, it is unlikely to shake the Bank of Japan’s view that the economy is improving toward its goal of steady growth and stable inflation.

At its last meeting in late October, the BOJ’s governor struck a less cautious tone about the outlook and reaffirmed that inflation and economic growth are on track.

Many economists and investors expect the central bank to raise interest rates in the near term amid signs of improvements in the domestic economy, alongside concerns about inflation triggered by a weaker yen, which raises the cost of imports.

The economy grew 0.9% on an annualized basis, which reflects what would happen if the third-quarter pace continued for a full year.

Private consumption increased 0.9% from the previous quarter, expanding for two consecutive quarters. While an increase in summer bonuses and a one-time income and residential tax cut buoyed consumer sentiment, typhoons and an earthquake warning made consumers hesitant to go out and spend.

It remains unclear whether higher wages will smoothly translate into more spending by price-sensitive Japanese consumers, some economists say.

Capital expenditure fell 0.2% from the previous quarter, Friday’s data showed, partly reflecting the impact of typhoon-related production suspensions as well as a slowdown in some overseas economies.

Economists expect the Japanese economy to continue expanding at a moderate pace on the back of a recovery in inflation-adjusted wages, labor-saving investments and the effects of inbound tourism.

But the economic outlook remains highly uncertain. Japan faces a political shift at home that could affect economic and monetary policy. Abroad, there are brewing risks around how U.S. policymaking under President-elect Donald Trump will affect the global economy and trade flows.

“There is the possibility that Japan would be affected in various ways, depending on policies" proposed by Trump, a Cabinet Office official said. Under the first Trump administration, higher tariffs on China had indirect effects on Japanese manufacturers because they provide parts for Chinese products shipped to the U.S., the official said.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com