Japan Faces First Economic Contraction in Six Quarters—Are U.S. Tariffs to Blame?

Japan’s economy is on the brink of its first contraction in six quarters, as preliminary indicators suggest that GDP likely shrank 0.6% in real terms (2.5% annualized) in Q3 2025, according to a Reuters poll of 18 economists. This follows a 2.2% annualized expansion in Q2, signaling a sharp slowdown driven primarily by external pressures.