Japan's economy – the fourth largest in the world – contracted by 0.4% in the third quarter of 2025, or by 1.8% year-on-year, according to preliminary data from the Ministry of Finance.
This marks the first decline in the country's GDP in six quarters.
The value of real gross domestic product corresponds to the median forecast of an annual contraction of 1.8% among economists surveyed by the Japan Center for Economic Research (JCER), an analytical division of Nikkei.
Exports fell by 1.2%, while imports decreased by 0.1%. As a result, net exports took away 0.2 percentage points from GDP, accounting for half of the overall decline.
However, since the contraction of the economy as a whole was not as significant as expected, it is likely a temporary downturn rather than the beginning of a recession, Reuters reports.
Exports became a major restraining factor as the impact of increased tariffs in the U.S. intensified. Automakers recorded a sharp decline in shipment volumes, which changed the previous advance buildup of exports ahead of the tariff increases. The U.S. and Japan formalized an agreement in September that introduced a base tariff of 15% on nearly all Japanese goods, down from the initial 27.5% on cars and 25% on most other goods.
A previous Bloomberg survey indicated that Japan's economy contracted by 1.2% in the third quarter of 2025 due to losses inflicted on its exports by U.S. tariffs.
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