US tariff pressures push Japan’s economy into first-quarter decline

Posted on May 20, 2025   |  

Japan’s economy shrank in the first quarter of 2025, with GDP falling 0.7% annually and 0.2% quarterly—worse than market expectations.

Weak private consumption, which accounts for over half of the economy, and falling exports led to the decline.

Export demand dropped 0.6% while imports rose 2.9%, cutting 0.8 percentage points from GDP growth.

Capital spending increased by 1.4%, and the previous quarter’s growth was revised up to 2.4%, offering some relief.

The GDP deflator rose 3.3%, suggesting companies are passing on higher costs to consumers.

Trade tensions with the U.S., including looming 24% tariffs on Japanese goods, added pressure—especially on Japan’s key auto industry.

Automakers like Toyota expect profits to fall sharply if the new tariffs take effect in July without a trade deal.