By Alimat Aliyeva
Japan’s economy shrank in the first quarter of 2025 for the
first time in a year — and at a faster pace than expected —
underscoring the fragile nature of its economic recovery. The
contraction comes as global trade tensions escalate, fueled by
aggressive tariff policies from U.S. President Donald Trump,
Azernews reports.
According to preliminary government data released on Friday,
Japan’s real gross domestic product (GDP) fell by an annualized
0.7% in the January–March quarter. This marked a sharper decline
than the median market forecast of a 0.2% drop. The unexpected
downturn was primarily driven by falling exports and persistently
weak private consumption.
Reuters reports that high U.S. tariffs have cast a shadow over
Japan’s export-reliant economy — particularly the automotive
sector, one of the country’s industrial cornerstones. The 25%
tariffs imposed by Washington on cars, steel, and aluminum have hit
Japanese manufacturers hard, especially automakers like Toyota and
Honda that heavily depend on the U.S. market.
Senior economist Yoshiki Shinke from the Dai-ichi Life Research
Institute noted that Japan currently lacks a strong growth engine.
“With both exports and consumption weak, the economy remains highly
vulnerable to external shocks — especially policy shifts like
Trump’s tariffs,” he said.
Economic Revitalization Minister Ryosei Akazawa acknowledged
that while recent wage hikes by major companies might support a
modest recovery, significant risks remain. “The path forward is
highly uncertain,” he cautioned, highlighting the potential fallout
from deteriorating trade relations.
As part of his broader trade offensive, President Trump has
imposed 10% tariffs on most countries — excluding Canada, Mexico,
and China — and has threatened Japan with a 24% tariff on
automobile exports starting in July unless a new bilateral trade
agreement is reached.
These protectionist measures are not only squeezing Japan’s
export volumes but also complicating the Bank of Japan’s monetary
policy decisions. At its policy meeting from April 30 to May 1, the
central bank sharply lowered its economic growth forecasts and
expressed doubts about whether wage growth alone could sustain
household spending and broader economic momentum.
The Japanese yen has seen increased volatility amid these
tensions, as investors flock to the currency as a safe haven during
global uncertainty — paradoxically putting even more pressure on
Japanese exports by making them less competitive abroad. Meanwhile,
consumer confidence remains low, with households hesitant to spend
despite nominal wage increases.
Looking ahead, economists warn that unless global trade tensions
ease and domestic consumption picks up, Japan may face an extended
period of economic stagnation reminiscent of its “Lost Decade.”
AloJapan.com