Japans GDP shrank 0.2% in first quarter: official data

Japans GDP shrank 0.2% in first quarter: official data

Japans economy contracted 0.2 percent between January and March, the first quarterly drop in a year, according to cabinet office data released Friday. The worlds fourth-largest economy is trying to negotiate relief from punishing US trade tariffs as it seeks to shake off stagnation that has long plagued the country. Fridays preliminary figure for quarter-on-quarter GDP was worse than market expectations of a 0.1 percent contraction. It marked a slowdown from growth of 0.6 percent in October-December. The last time the Japanese economy shrank was in January-March 2024 -- when it contracted 0.4 percent. Exports, which fuel Japans growth, were down 0.6 percent while imports jumped 2.9 percent -- weighing on overall GDP. Ahead of the data release, analysts warned that Japan will face headwinds as US President Donald Trumps levies roil the global economy. "As for the outlook, uncertainty is greatly heightened by the Trump tariffs, and it is likely that the economic slowdown trend will become clearer from (the second quarter) onward," said BNP Paribas chief economist Ryutaro Kono. "The increasing uncertainty, brought on by the Trump administration, is expected to weigh on corporate spending such as capital investment and drive down demand for capital goods," such as machinery and tools, he said. Trumps hardball campaign to rectify what he says are unfair trade imbalances includes tariffs on trading partners and imports including steel and automobiles. But Japans economic woes run deeper than the trade war. With domestic and foreign demand flagging, its economy "remains without a driving force", said Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute. "Although the main scenario is not expected to lead to an economic slowdown, the possibility of the economy entering a recession cannot be ruled out, depending on the degree of downward pressure caused by the tariff issue," he said in a note published ahead of Fridays data. Earlier this month the Bank of Japan revised down its growth forecasts and held interest rates steady, warning that trade tariffs are fuelling global economic uncertainty. The BoJ said it now expects Japans GDP to rise 0.5 percent in the fiscal year that started in April -- down from its previous estimate of 1.1 percent. "Trade and other policies in each jurisdiction (are likely to) lead to a slowdown in overseas economies and to a decline in domestic corporate profits," the bank said. However, "factors such as accommodative financial conditions are expected to provide support" and "thereafter, Japans economic growth rate is likely to rise".