Japan has reported its economy contracted at a 1.8% annual pace in July-September as President Donald Trump’s tariffs hurt exports.

Shipments from automakers in particular plummeted, following a period of hiking exports before tariffs came into effect.

The Japanese economy shrank 1.8 percent from the same quarter last year as U.S. tariffs dampened automobile exports and prompted a bleak outlook for growth.

Japan’s economy contracted less than expected in Q3 2025 as domestic consumption offset weak exports, though trade tensions, housing pressures, and strained China relations continue to pose risks.

Early signs on Japan's annual wage negotiations for next year point to another round of solid pay hikes despite profit pressure from U.S. tariffs, bolstering the case for the Bank of Japan to raise interest rates further.

Real gross domestic product shrank 0.4% on a quarter-over-quarter basis, further complicating the timeline of the central bank’s next interest-rate hike.

China is trying to impose economic costs on Japan for wading into the issue of Taiwan. But experts say the escalating dispute could ultimately hurt China too.

Japan’s diplomatic rift with China has expanded into a sweeping economic and cultural freeze with Beijing halting Japanese seafood imports, suspending film releases, warning citizens against travel to Japan & signalling broader retaliation unless Tokyo retracts PM Sanae Takaichi’s recent remarks on Taiwan.