Japan’s economy is expected to have posted a modest expansion in the second quarter of 2025, avoiding a technical recession despite the strain from US tariffs, according to a Bloomberg survey of economists. Median estimates point to an annualised 0.4% rise in gross domestic product (GDP) for the April–June period, following a contraction in the previous quarter.
Friday’s release from the Cabinet Office will mark the first official reading since US President Donald Trump’s across-the-board tariffs including a 10% levy on all goods and a 25% duty on cars, took effect in April. While the baseline tariff has since risen to 15%, economists note that exporters rushed shipments early, limiting the immediate damage. “It’s easy to think that the negative effects of Trump’s tariffs would have started showing up in exports between April and June, but that wasn’t really the case,” said Shinichiro Kobayashi, chief economist at Mitsubishi UFJ Research and Consulting.
Net exports are believed to have supported growth after a weaker import pace, while inbound tourism spending surged 18%, buoyed by record visitor numbers in the first half of the year. Kobayashi, who forecasts overall growth of 0.2%, said service exports and steady business investment were key drivers. Capital spending is estimated to have climbed 0.7%, supported by software and urban redevelopment projects, with the Bank of Japan’s Tankan survey showing firms plan an 11.5% investment increase this fiscal year.
Private consumption is forecast to have edged up 0.1% amid gains in household spending during May and June. However, stubborn inflation continues to weigh on consumer confidence. The Bank of Japan may stay on course for another rate hike this year if domestic demand proves resilient against the backdrop of volatile global trade conditions.
The government has already trimmed its growth forecast for the fiscal year to 0.7% from 1.2%, citing the tariff hit. Prime Minister Shigeru Ishiba, whose ruling coalition recently lost its upper house majority, faces mounting calls to resign, though he has pledged to continue in office while implementing the US trade deal.
While markets may view the GDP data as a sign of stabilisation, Kobayashi warned that the boost from front-loaded exports could fade, potentially leading to a contraction over the summer. “The economy will likely shrink as the lift from early shipments disappears,” he said.
Bloomberg
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