Japan Economy Contracts at Annualized 0.7% in Q1

Japan's economy contracted by 0.7% on an annualized basis in Q1 of 2025, underperforming market estimates of a 0.2% decline and marking a sharp reversal from an upwardly revised 2.4% growth in Q4, preliminary data showed.

It marked the first yearly decline in a year, as private consumption remained subdued, posting its weakest growth in four quarters.

Government spending also declined for the first time in five quarters, though the drop was only marginal.

At the same time, net exports weighed on the GDP amid growing concerns over rising U.S.

tariffs under President Donald Trump and weakening demand from major trading partners including China.

On a brighter note, capital expenditures accelerated, representing the fourth consecutive quarter of expansion.