Japan's economy shrinks as Trump's tariffs hit exports hard
What's the story
Japan's economy has contracted for the first time in six quarters, with a quarterly decline of 0.4% from July to September. The contraction is mainly due to a sharp fall in exports, which have been struggling under the weight of US tariffs imposed by President Donald Trump. On an annualized basis, Japan's real GDP shrank by 1.8% during this period.
Trade effects
Exports and imports impact Japan's GDP
Japan's exports of goods and services fell by 1.2% in the July-September quarter, after a 2.3% rise in the previous quarter. This decline was largely attributed to US tariffs, which have been affecting exports since May. However, there was a slight rebound in September. Imports also fell slightly by 0.1%, contributing to the overall economic contraction during this period.
Consumption impact
Domestic consumption mitigates economic downturn
Despite the contraction, domestic consumption helped to mitigate the economic downturn. Government and private consumption rose by 0.5% and 0.1%, respectively, from the previous quarter. Public demand grew by 0.5% quarter-on-quarter and contributed 0.1% point to Japan's economy during this period.
Tariff impact
Trade deal with US reduces tariffs
In July, Japan and the United States finalized a trade deal that lowered tariffs on Tokyo's exports to Washington from 27.5% to 15%. The new tariffs came into effect on August 7. Political uncertainty has also plagued Japan's economy recently, until Sanae Takaichi took office as prime minister in October.