Japan Jan.-March GDP shrinks for 1st time in 1 year amid weak spending

TOKYO, 17th May, 2025 (WAM) – Japan’s economy shrank an annualised real 0.7% in the January-March period, the first contraction in a year, government data showed, underscoring that domestic demand was sluggish even before higher U.S. tariffs took full effect.

In the first quarter of 2025, real gross domestic product, adjusted for inflation, declined 0.2% from the October-December period, as weak consumer spending amid inflation and increased import costs weighed on growth, the Cabinet Office said as quoted by Kyodo News.

U.S. President Donald Trump began imposing heavy tariffs on Japanese products in April, raising concerns that the export-driven economy could suffer a sharp downturn, potentially weighing on household and corporate sentiment.

The latest GDP data came as Prime Minister Shigeru Ishiba’s minority government is preparing to compile an economic package to help ease the impact of inflation and the U.S. levies ahead of the House of Councillors election this summer.

On the quarter, private consumption, which accounts for more than half of the economy, rose for the fourth consecutive quarter, inching up 0.04% as inflation continued to outpace wage hikes.

Exports fell 0.6%, marking the first decline in four quarters, weighed down by a decline in charges for the use of intellectual property rights and research and development services.

Meanwhile, imports, whose growth impacts GDP negatively, expanded 2.9%, driven by aircraft and payments for online advertising.

Among other key components, capital investment climbed 1.4 percent, rising for the fourth straight quarter, helped by demand for semiconductor production equipment and labor-saving technologies amid a chronic labor shortage.

Nominal GDP increased 0.8% from the October-December period, or 3.1% at an annualized rate.