Japan Q3 GDP Shrinks More than Initially Anticipated

Japan’s GDP contracted 0.6% qoq in Q3 2025, deeper than the flash estimate of a 0.4% decline and market forecasts for a 0.5% drop. The latest figure followed a downwardly revised 0.5% growth in Q2 and marked the first quarterly contraction since Q1 2024, with business spending slipping for the first time in three quarters (-0.2%, compared with the flash estimate of a 1.0% gain and missing forecasts for a 0.4% growth, after a 1.3% rise in Q2). The weaker reading highlighted ongoing pressure from higher borrowing costs. Private consumption remained soft, edging up 0.2%, slightly above both the preliminary estimate and consensus of 0.1%, but slower than a 0.3% rise in Q2. Government spending also eased (0.2%, compared with the flash reading of 0.5% and after a 0.3% rise previously). Net trade added further drag (-0.2ppts), with exports (-1.2% vs 2.3% in Q2) falling faster than imports (-0.1% vs 1.3%) after Washington imposed a 15% baseline tariff on most Japanese goods in September.

Japan’s GDP contracted 0.4% qoq in Q3 2025, reversing an upwardly revised 0.6% growth in Q2 but performing slightly better than market expectations of a 0.6% decline, preliminary data showed. It was the first quarterly drop since Q1 2024, reflecting subdued private consumption (0.1% vs 0.4%) amid lingering cost pressures, particularly elevated rice prices and rising utility bills. Net trade also contributed negatively (-0.2 ppts), with exports (-1.2% vs 2.3%) falling faster than imports (-0.1% vs 1.3%) after Washington imposed a 15% baseline tariff on most Japanese goods in September. Still, government spending (0.5% vs 0.1%) and business investment (1.0% vs 0.8%) recorded their strongest gains in five quarters, supported by front-loaded public works and corporate upgrades to production capacity. The latest print comes as Prime Minister Sanae Takaichi’s administration prepares a stimulus package to ease rising living-cost pressures and support exporters facing higher U.S. tariffs.

Japan’s GDP expanded 0.5% qoq in Q2 2025, beating a flash estimate of 0.3% and picking up from an upwardly revised 0.1% in Q1. It was the fifth straight quarterly growth, driven largely by upward revision in private consumption (0.4% vs 0.2% in flash data, after a flat Q1). Government spending was flat after a 0.5% drop previously. Net trade added 0.3ppts, as exports rebounded (2.0% vs -0.3% in Q1) while imports slowed sharply (0.6% vs 2.9%). Exporters rushed shipments ahead of U.S. tariffs, while automakers cushioned the hit from rising duties by cutting prices to sustain production. Business investment grew 0.6%, revised down from 1.3% and below forecasts of 1.2%, reflecting the drag from higher borrowing costs, after a 0.7% increase in Q1. Meanwhile, the sudden resignation of Prime Minister Shigeru Ishiba injected political uncertainty, raising concerns that delays in fiscal support or reform measures could weigh on business sentiment and household confidence in the coming months.