Japan's quarterly GDP shrinks for first time in a year

TOKYO

Japan's economy contracted 0.2 percent between January and March, the first quarterly drop in a year, according to cabinet office data released on May 16.

The world's fourth-largest economy is trying to negotiate relief from punishing US trade tariffs as it seeks to shake off stagnation that has long plagued the country.

May 16's preliminary figure for quarter-on-quarter GDP was worse than market expectations of a 0.1 percent contraction.

It marked a slowdown from growth of 0.6 percent in October-December. The last time the Japanese economy shrank was in January-March 2024 -- when it contracted 0.4 percent.

Exports, which fuel Japan's growth, were down 0.6 percent while imports jumped 2.9 percent, weighing on overall GDP.

On an annualised basis, GDP shrank 0.7 percent in the first quarter.

Japan's economic woes run deeper than the trade war.

With domestic and foreign demand flagging, its economy "remains without a driving force", said Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute.

"The possibility of the economy entering a recession cannot be ruled out, depending on the degree of downward pressure caused by the tariff issue," he warned.

Earlier this month the Bank of Japan revised down its growth forecasts and held interest rates steady, warning that trade tariffs are fuelling global economic uncertainty.

The BoJ said it now expects Japan's GDP to rise 0.5 percent in the fiscal year that started in April -- down from its previous estimate of 1.1 percent.