The Tokyo Tower stands amid buildings at dusk in Tokyo, Japan.
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Japan’s economy expanded 0.3% in the second quarter of 2025, compared to the first three months of the year, as the country grappled with the volatile tariff policy out of the United States.
This was compared to the revised 0.1% growth seen in the first quarter, and was higher than the 0.1% increase expected by economists polled by Reuters.
On a year-over-year basis, Japan’s GDP expanded 1.2% in the second quarter, falling short of the first quarter’s 1.8% growth.
The GDP reading comes as Japan struggled to cope with an uncertain trade environment in the second quarter, with the country only reaching a trade deal with the U.S. on July 23.
The deal sees Japan face a 15% blanket tariff on all exports to the U.S., including automobiles.
Throughout the second quarter, Japan was spared the 24% tariff that was announced on “Liberation Day,” but had to face 25% duties on its key automobile sector.
Auto exports to the U.S. are a cornerstone of Japan’s economy, making up 28.3% of all shipments in 2024, according to customs data.
Trade data from April to June revealed that exports to the U.S. had plunged year over year for all three months, with June seeing an 11.4% drop in shipments compared to the same period a year ago.
Marcel Thieliant, head of Asia-Pacific at Capital Economics, noted that the 11.4% decline in exports to the U.S. was the largest since the start of the Covid-19 pandemic in 2020.
After its July 31 meeting, the Bank of Japan upgraded its forecast for the country’s economy to grow 0.6% in its 2025 fiscal year, running from April 2025 to March 2026.
However, the central bank also cautioned that trade and other policies globally would lead to a slowdown in overseas economies, as well as a decline in domestic corporate profits.
— This is breaking news, please check back for updates.
