Japan Jan.-March GDP shrinks for 1st time in 1 yr amid weak spending
Japan's economy shrank an annualized real 0.7 percent in the January-March period, the first contraction in a year, government data showed Friday, underscoring that domestic demand was sluggish even before higher U.S. tariffs took full effect, Kyodo reports.
In the first quarter of 2025, real gross domestic product, adjusted for inflation, declined 0.2 percent from the October-December period, as weak consumer spending amid inflation and increased import costs weighed on growth, the Cabinet Office said.
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 GDP figure was weaker than the average projection of an annualized real 0.19 percent decline among 37 economists in a Japan Center for Economic Research poll. GDP is the total value of goods and services produced in a country.
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 percent as inflation continued to outpace wage hikes.
Exports fell 0.6 percent, 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 percent, driven by aircraft and payments for online advertising.
Economists said Japan's growth is likely to slow further in the April-June quarter or later, depending on progress in negotiations with the United States aimed at reducing Trump's hefty tariffs.
Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting, said the GDP contraction reflected sluggish consumer spending that failed to offset a drop in external demand.
"Surging prices have forced consumers to spend more, but private consumption has not increased in real terms for around half a year," Kobayashi said, noting consumer spending only grew 0.1 percent in the previous quarter.
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 percent from the October-December period, or 3.1 percent at an annualized rate.
To note, Japan set to fully cover childbirth costs possibly from April 2026.