Shibuya crossing in Tokyo.

Japan’s economy posted stronger-than-expected growth in the third quarter on strong export growth but spending at home remained sluggish.

The gross domestic product of the world’s third-largest economy grew an annualized 2.2 percent in the July to September quarter. It grew 0.5 percent on a quarter on quarter basis- up from the 0.2 percent growth registered in the second quarter.

The figures are encouraging for Japan but they come at a time when the country and the rest of Asia is contemplating the economic implications of a Trump presidency on the region. U.S. president elect Donald Trump has threatened to slap a 45 percent tariff on all Chinese imports and there is talk of a possible trade war erupting between the two countries. Such a development would have repercussions throughout Asia; Japan and South Korea are major trading partners of both China and the United States. Meanwhile, Trump has been extremely vocal in his opposition to the 12-nation Trans-Pacific Partnership pact and the White House has said the deal is essentially dead at this point.

Japan’s exports grew a robust 2 percent in quarter-on-quarter terms but private consumption grew just 0.1 percent. Japanese retailers saw declining sales in October and September. But on a positive note, tourist arrivals to Japan are still growing- albeit at a slower pace than in the first few months of the year. Arrivals grew 19 percent in September, according to preliminary data from the Japan National Tourism Organization.

Takashi Miwa, an analyst with Nomura in Tokyo, noted that much of the third-quarter GDP growth can be attributed to an unexpectedly steep drop in imports, down 0.6 percent quarter on quarter.

“We do not think the high growth recorded for [July to September] will be sustainable,” he said. “We see the strong results for exports as consistent with our forecast of a gradual economic recovery driven by overseas demand. We think the key point to watch from here will be whether this upswing in exports will propagate through to a recovery in capex and consumption, which currently remain weak.”

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