Japan’s GDP Shrinks Annualized 0.7％ in Jan.-March; U.S. Tariff Impact Feared to Extend Drop in April-June

The Yomiuri Shimbun

17:11 JST, May 16, 2025

Japan’s inflation-adjusted real gross domestic product shrank 0.2% in January-March 2025 from the previous quarter after seasonal adjustment, the Cabinet Office said Friday in a preliminary estimate.

This equates to a 0.7% drop on an annualized basis, marking the country’s first negative growth in four quarters.

Personal consumption stagnated due to the resurgence of high prices, and exports also declined.

By category, personal consumption — which accounts for more than half of Japan’s GDP — remained almost flat, with just a 0.04% increase from the previous quarter. Consumption of staple foods including rice and bread as well as basic foodstuffs such as fish, meat and vegetables performed poorly. Purchases of high-priced items such as refrigerators and automobiles were sluggish.

Corporate capital investment rose 1.4%, marking the fourth consecutive quarter of growth.

Exports saw its first decline in four quarters with a 0.6% drop. Last-minute automobile exports made ahead of the imposition of U.S. tariffs partially offset a decline in items including royalties for intellectual property rights. Consumer spending by foreign visitors remained strong against the backdrop of the weak yen. Imports grew 2.9%, marking the first increase in two quarters. Nominal GDP, which closely reflects household sentiment, rose 0.8% — or an annualized rate of 3.1%.

Real GDP for fiscal 2024, announced on the same day, was 0.8% higher than fiscal 2023, marking four consecutive years of growth. In nominal terms, GDP rose 3.7% to ¥616.9 trillion, exceeding the ¥600 trillion threshold for the first time in a fiscal year.

The April-June period is expected to reflect the impact of the White House’s tariff policy on exports and capital investment, raising concerns about a slowdown in economic growth.

“We must remain vigilant regarding the risk of an economic downturn caused by U.S. trade policies,” economic revitalization minister Ryosei Akazawa told reporters after a Cabinet meeting.

Taro Saito of NLI Research Institute forecasts real GDP to also decline in the April-June quarter.