Japan’s GDP Shrinks 0.2% in Q1 2025, Below Expectations

Japan’s GDP Falls 0.2% in Q1 2025, Below Expectations

Japan's economy contracted by 0.2% in the first quarter of 2025, according to the initial reading published by Japan’s Cabinet Office on Friday. This marks a sharp slowdown from a 0.6% growth in the fourth quarter of 2024. The contraction was also worse than the market forecast, which had anticipated a smaller decline of 0.1%.

On an annualized basis, Japan’s GDP shrank by 0.7% in Q1, down from a 2.2% growth rate in the previous quarter. This figure also fell short of the market’s expectations of a 0.2% decline.

The weaker-than-expected GDP figures indicate a slowdown in domestic demand and suggest that Japan’s economy is facing headwinds in early 2025. The drop in economic activity comes as businesses and consumers may have reduced spending due to ongoing challenges in global trade and domestic inflationary pressures.

The latest figures raise concerns that Japan may be at risk of a technical recession, defined as two consecutive quarters of negative growth. The data will likely prompt policymakers to consider further stimulus measures to support the economy in the months ahead.