Japanese economy shrinks for first time since early 2024
By Benjamin Chiou
Date: Monday 17 Nov 2025
(Sharecast News) - Japan has registered its first quarterly economic contraction in one and a half years as rising cost pressures weighed on consumption and US trade tariffs hit exports.
Gross domestic product fell by 0.4% over the July to September period, pulling back after a 0.6% expansion in the second quarter.
While slightly better than the 0.6% contraction expected by economists, this was the first fall in economic activity since the first quarter of 2024.
That equated to a 1.8% decline year-on-year, reversing a 2.3% increase the previous quarter, though better than the 2.5% contraction expected.
On a quarterly basis, domestic demand fell by 0.2% over the three-month period, following a 0.3% increase previously, with private residential investment sinking 9.4% after rising 0.3% before. Public demand however was 0.5% higher following a 0.1% decrease previously.
Meanwhile, net trade had a 0.2 percentage point negative impact on overall GDP, following a 0.2pp positive impact in the second quarter, following the introduction of trade tariffs on Japanese imports into the US. Compared with the previous quarter, Japanese exports fell 1.2%, while imports fell by a lesser 0.1%.
Analyst Lee Hardman from MUFG Research said that Monday's data will "further encourage market expectations for bigger fiscal stimulus and delayed BoJ policy normalisation".
The Bank of Japan has held its benchmark interest rate at 0.5% since the start of the year, following an increase from 0.25% in January.
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