Tokyo, November 17, 2025:
Japan’s economy contracted for the first time in six quarters, with GDP shrinking 1.8% on an annualized basis in the July–September quarter, according to preliminary government data released Monday. The decline marks the country’s first economic setback since early 2024 and underscores the mounting pressure from global trade tensions.
The contraction was driven primarily by a sharp drop in exports, as several major trading partners imposed tariffs that directly impacted Japan’s automotive, electronics, and machinery shipments. Economists say the fallout from these tariffs has weakened Japan’s previously steady export engine, which had been a crucial pillar of growth over the past year.
Domestic consumption remained relatively stable but insufficient to offset external weaknesses. Business investment also showed signs of cooling, with companies delaying capital expenditure amid uncertainty over global demand and foreign policy developments.
Analysts warn that if trade pressures persist, Japan may face an extended period of subdued growth, raising concerns about potential policy intervention from the Bank of Japan or fiscal stimulus from the government.
With global economic conditions fluctuating and supply-chain challenges continuing, Japan’s Q3 performance may serve as an early indicator of broader regional vulnerabilities in the coming quarters.
