Japan’s economy faces its first contraction in a year, with a 0.2% shrinkage in the first quarter when compared to the final quarter of 2024 as exports tumbled significantly, according to the preliminary government data on Friday.
The contraction was higher than market’s expectations, highlighted by a Reuters poll of economists that anticipated only a 0.1% decline.
On an annualized scale, the GDP recorded a 0.7% contraction, considerably more than the 0.2% economists were predicting. Exports, a significant component of Japan’s economic framework, dropped by 0.6% quarter-on-quarter, shaving 0.8 percentage points off the GDP. This decline is largely attributed to the uncertainties generated by the trade policies under U.S. President Donald Trump, which have posed challenges for Japan’s export-driven economy.
Japan’s chief trade negotiator, Ryosei Akazawa, stated on Friday that U.S. tariffs did not noticeably impact Japan’s GDP in the first quarter. Nonetheless, he indicated potential risks to Japan’s economic stability stemming from U.S. trade policies, promising that the government stands ready to implement all necessary measures to support businesses affected by these developments.
