Japan’s economic system shrinks greater than anticipated – DW – 05/16/2025 | EUROtoday

Japan’s economic system contracted at a better web page than anticipated within the first quarter of 2025, in accordance with official information for the January to March interval launched on Friday.

Japan’s Gross Domestic Product (GDP) contracted by 0.2% in comparison with the earlier quarter, the primary quarterly drop because the January-March interval in 2024.

However, in contrast with the identical quarter within the earlier yr, Japan’s economic system shrank by 0.7% — a lot steeper than the forecast 0.2% contraction

Sluggish exports, Trump tariffs

The decline was largely because of a fall in exports, which drive the Japanese economic system. Data exhibits demand for exports was waning even earlier than US President Donald Trump introduced sweeping tariffs.

On April 2, the US imposed a 24% tariff on Japanese items. It additionally imposed a further 25% levy on automobiles. The US is the biggest marketplace for Japan’s auto trade.

After a reprieve, the tariffs are because of take impact in July, until Japan can negotiate a deal.

“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,” BNP Paribas chief economist Ryutaro Kono advised AFP information company.

Tokyo has been attempting to barter a commerce cope with the US, however policymakers have acknowledged its has been troublesome to plan a response as Trump retains altering his thoughts.

‘Recession can’t be dominated out’

Japan’s economic system has been weak for fairly a while now, as an getting old inhabitants balloons welfare spending however limits labor and demand.

The Japanese central financial institution had lengthy maintained a coverage of detrimental rates of interest to enhance the economic system however started to progressively hike charges final yr.

Japan’s economic system “lacks a driver of growth given weakness in exports and consumption. It’s very vulnerable to shocks such as one from Trump tariffs,” stated Yoshiki Shinke, senior government economist at Dai-ichi Life Research Institute, advised Reuters information company.

“The data may lead to growing calls for bigger fiscal spending,” he stated, including that “the possibility of the economy entering a recession cannot be ruled out, depending on the degree of downward pressure caused by the tariff issue.”

Edited by: Wesley Rahn