The growth of Japan’s gross domestic product for three quarters in a row appears to warrant no optimism for the prospects of the economy. The annualized 2.2 percent growth in GDP for the July-September period was driven by a 2 percent rise in exports, while consumer spending and capital investment by businesses, the two major components of GDP, remained nearly flat. Uncertainties continue to hang over external demand, with slowdowns in emerging economies and the unpredictability of U.S. trade and economic policies under the incoming president, Donald Trump.

For a more sustainable path to growth, the Abe administration should urgently tackle long-awaited structural reforms to generate new avenues of economic expansion. It also needs to look more seriously into what is behind consumers’ continued hesitation to spend and put priority on adjusting its economic policies to address the problem.

GDP growth in the last quarter accelerated from the 0.7 percent gain in the April-June period and was faster than the average of private-sector forecasts. But personal consumption, which accounts for 60 percent of Japan’s GDP, rose a scant 0.1 percent from the previous quarter while the increase in capital investment stood at a mere 0.03 percent. While exports, which statistically include spending by inbound tourists, were pushed up by brisk sales of semiconductor production equipment to Asia and electronic parts for use in smartphones, domestic demand gained only 0.1 percent, with a 0.6 percent fall in imports reflective of the sluggish demand at home.

Job data continues to improve. Unemployment is down to 3.0 percent, and job offers outnumber job seekers by 1.38 times on a nationwide average — the highest in roughly 25 years. Per-household wages, which for years have been outpaced by price increases, are finally rising on a net basis in recent months as manpower shortages intensify and prices fall. The aggregate salary income of wage earners in the July-September period rose an inflation-adjusted 3 percent from a year ago, the sharpest rise since 1996.

Still, consumer spending does not show much sign of picking up. Per-household spending in September fell 2.1 percent from a year earlier for the seventh consecutive month of decline. The wage gains do not seem strong enough to spur a recovery in personal consumption. As people’s spending remains subdued, consumer prices have dipped into negative territory, declining 0.5 percent in September on a year-on-year basis for the seventh monthly fall in a row — a far cry from the annual 2 percent inflation target set by the Bank of Japan in its 3½-year-old “unprecedented” monetary easing operation. That the 2.2 percent GDP growth in inflation-adjusted real terms outpaced the 0.8 percent growth in nominal terms is yet another indication that deflation may return.

Various theories have been floated to explain why consumer spending isn’t picking up despite the increase in employment and wages, including the tendency of the younger generation to save for a rainy day, concern over sustainability of the social security system dampening people’s appetite to spend, and the steep wage gaps between regular full-time employees and the growing ranks of irregular workers such as part-timers. The administration should look more closely at such possible structural impediments that restrain consumer spending and take relevant policy actions.

Further increases in people’s wages will be essential for more robust spending by consumers, which is crucial for self-sustained growth as overseas economic developments seem increasingly volatile. For the fourth year in a row, the Abe administration is expected to urge major companies to raise wages for employees in their annual pay negotiations next spring. But unlike previous years, when the administration boasted that its policy achieved the sharpest raises in years, businesses seem more guarded about significant wage hikes as their earnings inflated by the weak yen under Abe’s watch have been deflated by the yen’s upward trend since the year’s beginning. Listed companies expect their operating profits in the year to March to decline for the first time in five years.

Trump’s victory in the Nov. 8 U.S. presidential election adds to the uncertainty over prospects for the global economy. The Tokyo Stock Exchange’s Nikkei average lost nearly 1,000 points and the yen rose sharply against the dollar on the initial news of his upset win over Hillary Clinton — with the share prices then turning upward and the yen downward upon expectations of his promised tax cuts and fiscal spending benefiting the U.S. economy. The yen’s decline this week to the lowest levels in five months may give a respite to concerns over the exchange rate impact on corporate earnings.

But the sustained impact of the Trump presidency on Japan’s economy remains unclear. The president-elect making good on his protectionist campaign pledges to bring back American jobs by reviewing free trade will no doubt affect Japanese businesses in direct and indirect ways. Prime Minister Shinzo Abe should press Trump to uphold the U.S. commitment to free trade when they hold their meeting in New York on Thursday.

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