Japan's economy contracted by 0.2% in the first quarter of 2025, marking its first quarterly decline since early 2024. Compared to the same period in 2024, GDP shrank by 0.7%, exceeding expectations of a 0.2% drop. This contraction is largely attributed to decreased exports, exacerbated by the US's tariffs on Japanese goods, including a 24% tariff and a 25% levy on cars. Economists suggest that growing uncertainty from these tariffs might highlight a deepening economic slowdown in upcoming quarters. Japan also faces challenges from an aging population affecting growth potential.
"Uncertainty is greatly heightened by the Trump tariffs, and it is likely that the economic slowdown trend will become clearer from (the second quarter) onward," said BNP Paribas chief economist Ryutaro Kono.
"Japan's economy lacks a driver of growth given weakness in exports and consumption. It's very vulnerable to shocks such as one from Trump tariffs," said Yoshiki Shinke.
After a reprieve, the tariffs are due to take effect in July, unless Japan can negotiate a deal.
Japan's Gross Domestic Product (GDP) contracted by 0.2% compared to the previous quarter, the first quarterly drop since the January-March period in 2024.
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