Japan's economy contracted an annualized real 1.8 percent in the third quarter of 2025, marking the first contraction in six quarters, according to preliminary government data released on Monday.
Quarter-on-quarter, real gross domestic product (GDP), adjusted for inflation, in the July-September period declined 0.4 percent from the previous three months, according to the Cabinet Office.
Click to Gallery
Japan's GDP contracts 1.8 pct in Q3
Japan's GDP contracts 1.8 pct in Q3
Japan's GDP contracts 1.8 pct in Q3
Japan's GDP contracts 1.8 pct in Q3
The shrinkage in GDP was widely expected, as the Japanese economy grappled with sticky inflation, sluggish private spending and higher U.S. tariffs.
Exports decreased 1.2 percent from the April-June period while imports were down 0.1 percent. As a result, external demand, or exports minus imports, subtracted 0.2 percentage points from the GDP, accounting for half the decline.
Among other key components, private consumption, which accounts for more than half of economic output, inched up 0.1 percent while corporate investment increased 1.0 percent.
Japan's auto industry, which accounts for nearly 10 percent of GDP and 8.3 percent of jobs, has taken a heavy hit from the U.S. tariffs. In the first half of fiscal 2025, the seven major Japanese car-makers lost about 1.5 trillion yen (about 10 billion U.S. dollars). This is the first time since COVID-19 pandemic that all seven reported profit declines, with several falling into the red.
At the same time, Japan’s growth outlook is weakening. The government has cut its 2025 GDP forecast from 1.2 percent to 0.7 percent, and the OECD has made the same downgrade.
Japan's GDP contracts 1.8 pct in Q3
Japan's GDP contracts 1.8 pct in Q3
Japan's GDP contracts 1.8 pct in Q3
Japan's GDP contracts 1.8 pct in Q3
