FX.co ★ Japan Q3 GDP Growth Shrinks Less than Expected

Japan's GDP shrank by 0.4% quarter-on-quarter in the third quarter of 2025, as per preliminary data, which marks a reversal from a 0.6% expansion in the previous quarter. This decline, which is slightly better than the anticipated 0.6% drop, represents the first quarterly decrease since the first quarter of 2024. The contraction is primarily due to sluggish private consumption, which grew only 0.1% compared to 0.4% in Q2, pressured by ongoing cost challenges. Additionally, net trade negatively impacted growth by 0.2 percentage points, with exports plummeting by 1.2% as opposed to a 2.3% increase earlier and imports decreasing slightly by 0.1% versus a 1.3% rise, largely due to U.S. tariffs imposed in September, levying a 15% baseline charge on almost all Japanese goods. Nonetheless, government expenditure rose by 0.5% and business investment surged by 1.0%, both achieving their most significant growth in five quarters. This subdued economic performance comes as Prime Minister Sanae Takaichi's administration is organizing a stimulus package aimed at alleviating the rising living cost pressures on households.