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TOKYO—Japan’s economy shrank in the July-September period owing to a decline in exports caused by supply-chain constraints and lower consumer spending during a Covid-19 state of emergency.

In the third quarter, the world’s third-largest economy after the U.S. and China contracted 0.8%, compared with a 0.4% expansion in the previous quarter and consensus forecasts for a 0.2% contraction. It was the first contraction in two quarters. The economy shrank 3% on an annualized basis, which reflects what would happen if the third-quarter pace continued for a full year.