Japan's Economy Enters Contraction Phase
Japan's economy has recorded its first contraction in six quarters, with official data revealing a significant downturn driven primarily by declining exports affected by US-imposed tariffs.
The latest figures show Japan's real gross domestic product fell by 0.4% during the July-September quarter, marking a concerning reversal from previous growth trends.
Export Decline Drives Economic Slowdown
Exports emerged as the primary driver of this economic contraction, experiencing a 1.2% decline compared to the April-June quarter. More strikingly, exports were 4.5% lower than the same period last year, highlighting the sustained pressure on Japan's manufacturing sector.
The downturn follows trade tensions initiated by the Trump administration, which threatened Japanese goods with a 25% tariff in April before reducing it to 15% in July when both nations reached a trade agreement.
Broader Economic Impact and Responses
On an annualised basis, Japan's real GDP shrank by 1.8% in the three months through September. While this performance was better than the 2.4% decline economists had anticipated, it provides new Prime Minister Sanae Takaichi with compelling evidence to support an ambitious stimulus programme.
Private demand also showed weakness, falling by 0.3% quarter-on-quarter, indicating broader economic concerns beyond just export performance.
Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities, commented via Bloomberg: "Japan's economy was solid in the first half of this year and today's GDP showed that momentum is halted temporarily. I expect Japan's economy to be back on a moderate recovery trend going forward."
The White House has recently acknowledged the domestic impact of tariffs, with President Trump reducing levies on food imports including beef, tomatoes, coffee and bananas amid growing concerns about rising costs for American consumers.
