Official data showed that Japan’s economy shrank more than expected in the first quarter of 2025, the first significant contraction in a year.
US President Donald Trump’s trade policies cloud the outlook for economic recovery. The harsh US tariffs seriously challenge Japan’s export-oriented economy, particularly in the automotive industry.
The country’s gross domestic product (GDP) shrank by 0.7 percent in the January-March period, significantly exceeding the 0.2 percent decline expected by analysts. The main reasons for the recorded decline are stagnant private consumption and a decrease in exports, which indicates weakening external demand even before the “reciprocal” tariffs announced by Trump on April 2 came into effect.
However, some positive trends were also recorded. The economic growth rate for last year’s quarter was revised to 2.4 percent from the previous 2.2 percent. In addition, capital expenditures increased by 1.4 percent, positively impacting domestic demand by adding 0.7 percentage points.
