Global trade barriers and increasing expenses lead to Japan's initial economic downturn after six consecutive quarters of growth

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Bitget-RWA2025/11/17 01:08

By:Bitget-RWA

- Japan's Q3 2025 economy contracted 1.8% annually, first decline in six quarters, driven by 0.4% GDP drop and weak private consumption amid global trade tensions and domestic cost pressures. - Nexon Co. defied downturn with ¥118.7B revenue and 61% growth in MapleStory, showcasing digital innovation's resilience despite broader economic headwinds. - BOJ faces balancing act as growth wanes, with U.S. tariffs and rising energy/food costs constraining domestic demand while capital spending remains supported b

Japan's economy shrank by 1.8% on an annualized basis in the third quarter of 2025, ending a streak of six consecutive quarters of growth. This downturn highlights increasing threats to the country's recovery as it faces both international trade disputes and rising domestic costs

based on initial estimates

. Although the decline was not as steep as the 2.5% drop predicted by analysts

according to projections from economists

, it reversed the 2.3% expansion seen in the previous quarter

as indicated by Q2 figures

and has raised doubts about the Bank of Japan’s (BOJ) capacity to keep its loose monetary stance.

As per preliminary figures

, the slowdown stemmed from a 0.4% quarterly drop in GDP. Private consumption, which makes up the largest share of Japan’s economy, edged up by only 0.1% following a 0.4% increase in the second quarter

according to Q2 statistics

. Exporters struggled with U.S. tariffs, which reduced the positive impact of net trade, while business investment stayed strong,

bolstered by expectations of tighter monetary policy

Global trade barriers and increasing expenses lead to Japan's initial economic downturn after six consecutive quarters of growth image 0

The BOJ, which has indicated it may consider more rate increases, now faces the challenge of supporting growth as economic momentum slows.

The economic contraction stands in contrast to the results of some Japanese companies. Nexon Co., a major player in the online gaming industry,

posted strong third-quarter earnings

, reporting ¥118.7 billion in revenue and a 61% year-on-year jump in sales from its MapleStory game. The company also revealed it would double its year-end dividend to ¥30 per share, signaling confidence in its ability to generate cash. Nexon’s performance demonstrates that certain industries, especially those driven by digital innovation, remain resilient despite broader economic challenges.

Experts caution that the GDP contraction could make it harder for Japan to achieve sustainable growth. The nation’s heavy dependence on exports leaves it exposed to shifts in global trade,

especially as new U.S. tariffs on Japanese products

—including a sweeping 15% tariff—are now being fully implemented. At the same time, domestic spending is being held back by ongoing cost increases, such as higher prices for food and energy.

The BOJ’s future policy decisions may depend on whether this downturn proves to be a short-term issue or points to more fundamental problems. While the 1.8% annualized decrease in Q3 was less severe than some had feared, the government’s recent stimulus actions—including rice subsidies and energy price support—might need to be broadened to prevent a deeper slump.

Currently, attention is centered on

how swiftly Japan can recover from its first quarterly decline

since the first quarter of 2024. With global markets preparing for tighter U.S. monetary policy and ongoing geopolitical risks, the BOJ’s upcoming decisions could influence not only Japan’s outlook but also the stability of the wider region.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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