BUSINESS – Japan’s economy showed unexpected resilience in the April–June quarter of 2025, expanding at a 1 percent annualized rate, exceeding forecasts despite the backdrop of U.S. tariff pressure. This marks the fifth consecutive quarter of growth for the country.
Cited from The Economic Times, on a quarter-over-quarter basis, real gross domestic product (GDP) increased by 0.3 percent, surpassing the modest 0.1 percent projection and outperforming market expectations. The Cabinet Office reported a 2 percent boost in exports, driven primarily by automakers accelerating shipments ahead of tariff implementation, and aided by a 90-day suspension on increased duties, giving exporters a brief but crucial window to send goods.
Aside from export strength, capital expenditure rose by 1.3 percent year-on-year, exceeding general expectations and reflecting sustained business investment. Private consumption ticked up 0.2 percent, showing only modest improvement and highlighting ongoing challenges for consumer demand.
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Net external demand played a vital role too, contributing an estimated 0.3 percentage points to GDP growth, a reversal from the previous quarter’s drag. Overall, the performance affirmed Japanese policymakers’ hopes that the nation would avoid slipping into recession, despite global trade uncertainties.
Nonetheless, analysts caution that this growth may be short-lived, largely stemming from pre-tariff shipment surges. As those stockpiled exports taper off, the economy may struggle to sustain momentum into Q3. Coupled with elevated inflation and stagnant wage growth, the outlook for continued expansion remains fragile, evidenced by the government’s revised annual growth forecast of 0.7 percent, lowered from 1.2 percent, acknowledging mounting headwinds.
Market reactions were immediate: the Japanese yen strengthened against the dollar following the GDP data, prompting speculation that the Bank of Japan may shift toward raising interest rates, potentially as early as late in 2025.
So while Japan’s latest GDP performance exceeded expectations, macroeconomic vulnerabilities—tariff-induced shocks, weak consumption, and inflation—cast an uncertain light on the sustainability of growth. The coming months will reveal whether this quarter marks a robust recovery or merely a brief reprieve.
