Japan's economy contracted 0.2% quarter-on-quarter in Q1 2025, reversing a 0.6% gain in Q4. On an annualized basis, GDP fell 0.7%, worse than the expected 0.2% drop and marking the first yearly fall in a year. Net trade was the biggest drag, subtracting 0.8 percentage points, as exports fell 0.6% and imports jumped 2.9%. Private consumption, which makes up over half of the economy, was flat, while government spending also stagnated after three consecutive quarters of growth. However, business investment grew strongly by 1.4%, its highest since Q2 2024.

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