The Japanese economy has suffered a quarter -annual shrinkage for a year in January to March, preliminary data showed Friday, and analysts warned that Donald Trump’s tariff could be activated in a stagnation if a deal is not concluded.
The 0.2 % contraction on the quarter was more than expected and will deal with Prime Minister Shigro Ishiba before the parliamentary elections in July, with voters angered by inflation and corruption within the ruling party.
Observers said the numbers – compared to 0.6 % growth in the last three months of 2024 – also means that the Bank of Japan should wait a little longer before resuming the cash tightening program.
The last time the economy in the fourth world in January to March 2024-when it contracted 0.4 %.
On an annual basis, the economy shrinks 0.7 % in the first quarter.
Before the data, experts said that Japan will face the opposite winds because the US President’s trade war is roaming in the global economy, and while Tokyo is conducting discussions with the White House to avoid the full influence, there are still a lot of concerns.
“Increased uncertainty is increasing dramatically due to Trump’s tariff, and the direction of economic slowdown is likely to become more clear than (the second quarter) onwards,” said Riotaro Kono, BNP Paribas Senior Economist BNP.
The Trump Hardball campaign to correct what it says is unforgettable commercial imbalances on commercial partners and imports including steel and cars.
But Japan’s economic problems are working deeper than the trade war.
“The economy is still” without a driving force, “said Yoshiki Xinak of the Dai Aichi Life Research Institute.
And he warned before the release of Friday: “It is not possible to exclude the possibility of entering the economy to recession, depending on the degree of declining pressure caused by the issue of customs tariffs.”
The data showed that exports, a major growth engine, decreased by 0.6 % on the quarter while imports jumped by 2.9 %, increasing the gross domestic product.
The Bank of Japan this month reviewed its growth expectations and maintained fixed interest rates, warning that commercial tariffs were nourishing global economic uncertainty.
“With the US tariff that is scheduled to affect export growth, it appears that the decision of the Bank of Japan to become more about economic expectations at its previous meeting,” said Marcel Thillants of the Capital Economics on Friday.
He expected that the central bank “may wait longer before resuming its tightening cycle than we expected.”
Moody’s analyzes of Moodyz said that government policies can double the risks of its economy by the American definitions.
“The Ishiba government has so far opposed financial support for the economy, a strategy that seemed to be unacceptable even before the trade war increased,” he wrote on Friday.
“With public support sliding, the policy axis may become inevitable, but it may be too late to make a difference.”
The numbers come as Ishiba is preparing for the House of Representatives in Japan in Parliament within two months.
His alliance was deprived of a majority in the powerful parliament in October, when voters have vent their anger at high prices and political scandals.
It was the worst result of the 15 -year elections for the Liberal Democratic Party (LDP), which has almost continuously ruled Japan since 1955.
This story was originally shown on Fortune.com
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