OKYO (AP) — Japan’s economy contracted at a steeper-than-expected annual rate of 2.3% in the July-September period, according to revised figures released by the government on Monday. This marks a downward adjustment from earlier data, which had indicated a 1.8% annual decline. The revision highlights the continued impact of external challenges, including the tariffs imposed by former U.S. President Donald Trump and a dip in public investment.
The revised figures show that Japan’s gross domestic product (GDP)—the total value of goods and services produced in the country—fell by 0.6% on a quarterly basis. In the preliminary report released last month, the decline was recorded at 0.4% on-quarter.
Exports, a vital component of Japan’s economy, were down 1.2% in the quarter compared to the previous three months. This figure was consistent with earlier data, reflecting the ongoing negative impact of U.S. tariffs on Japanese goods. Trump’s trade policies, including the imposition of higher tariffs on imports from many countries, continue to weigh heavily on Japan’s export-driven economy.
In particular, tariffs on automobiles, a major export for Japan, have had a significant adverse effect. In response to these measures, Japan has committed to investing $550 billion in the U.S. as part of an effort to alleviate tensions and support the U.S. economy.
Another contributing factor to the economic contraction was a sharp decline in private residential investment, which fell by 8.2% in the quarter. This marked a slight improvement over the previously reported 9.4% drop. Analysts suggest that the slowdown in residential investment was largely due to revisions in Japan’s building codes, which caused a sharp drop in housing starts earlier this year.
Outlook and Future Impact
The economic contraction in the July-September period underscores Japan’s ongoing struggles to navigate external trade pressures and internal challenges. The impact of the tariffs and the revision of building regulations has left key sectors of the economy, such as exports and real estate investment, vulnerable.
Despite a slight easing in tariff pressures, with the U.S. reducing the surcharge on nearly all Japanese imports to 15% from a proposed 25%, analysts remain cautious about the outlook. The auto tariffs, in particular, continue to pose a significant threat to Japan’s economic recovery.
As Japan looks to stabilize its economy, it will need to navigate these external pressures while bolstering domestic investments. The government’s response, including its substantial investment commitment in the U.S., reflects efforts to adapt to the evolving trade landscape.
This revised data signals a deeper struggle for Japan’s economy, suggesting that the road to recovery may be more challenging than previously anticipated. With the global economy also facing uncertainties, Japan will likely need to implement additional strategies to restore growth and mitigate risks in the coming quarters.
