Bloomberg: Japan’s Q1 2025 GDP contraction reinforces central bank’s cautious stance

According to updated figures, Japan’s economy shrank by 0.2% in the first quarter of 2025, keeping the central bank on a cautious path as weak growth persists. Meanwhile, Prime Minister Shigeru Ishiba is facing increasing political pressure ahead of critical elections, Bloomberg reports.

Japan’s initial estimate of a 0.7% GDP contraction was revised upward due to growth in inventories (+0.6%) and a slight rise in private consumption (+0.1%). However, the positive trend was partly offset by slower capital expenditures (down to 1.1%) and a drop in exports (–0.8%), according to the news agency.

The Japanese economy had already begun to slow even before US President Donald Trump escalated his tariff policy in April. According to Kazutaka Maeda of Meiji Yasuda Research Institute, the latest GDP figures provide no grounds for the Bank of Japan to raise interest rates, but they also don’t justify a cut. Given this, the central bank will likely maintain a wait-and-see stance at its June 17 meeting, the expert suggests.