Japan’s economy shrank by 1.8% in July-September due to Trump’s tariffs, impacting exports. GDP fell 0.4% quarter-by-quarter, the first contraction in six quarters. Exports decreased by 4.5%, while imports slipped by 0.1%. Private residential investment saw a significant drop of 9.4% quarter-on-quarter.

The decline in private residential investment was mainly due to changes in Japan’s building code. The U.S. imposes a 15% tariff on most Japanese imports, down from Trump’s initial plan for 25%. Prime Minister Sanae Takaichi aims to revive the economy through increased government spending, potentially complicating the central bank’s efforts to raise interest rates.

Analysts suggest a rate hike in December is unlikely, but early data for this quarter and business sentiment surveys hint at potential improvement. The Bank of Japan may resume raising interest rates in early 2026. Tariffs pose a challenge to Japan’s export-reliant economy, impacting automakers like Toyota.

Read more at Yahoo Finance: Japan’s economy contracts as exports get hit by US tariffs