Japanese economy contracts more than forecast in Q1 on weak exports
Exports drag GDP down 0.2% in 1st quarterly decline in year despite rise in domestic demand
ISTANBUL
Japan’s economy shrank by 0.2% in the first quarter of 2025, marking its first quarterly contraction in a year, according to preliminary data released Friday.
The figure exceeded the market expectations of a 0.1% decline, reflecting weaker exports and ongoing global headwinds.
Exports fell 0.6% during the quarter, subtracting 0.8 percentage points from gross domestic product. In contrast, domestic demand grew 0.6%, contributing 0.7 percentage points to GDP.
On an annual basis, the economy contracted by 0.7% -- well above analysts’ forecasts of a 0.2% drop.
The contraction followed the Bank of Japan’s May 1 decision to hold its policy rate steady at 0.5%.
“Negative demand shocks are expected, including the impact of increased uncertainties on business fixed investment and household consumption, a decrease in the volume of exports to the United States and a deterioration in Japan’s export profitability,” said the central bank.
It added that US tariff policy would continue to put downward pressure on Japan’s economic activity and prices.
Meanwhile, Japan has expanded its security clearance system to cover sectors deemed economically sensitive, such as advanced semiconductors and critical infrastructure, designating them as “classified,” Kyodo News reported.
Under the new system, government officials and private-sector employees involved in those sectors will undergo background checks by the Cabinet Office.
Defense, diplomacy, espionage, and counterterrorism are already regulated under a separate law governing state secrets.
