Slowing Growth Signals
In the third quarter of 2025, Japan’s gross domestic product (GDP) shrank by 1.8% year-on-year, marking its first contraction in six quarters. The dip highlights a mix of domestic and external challenges shaping the world’s third-largest economy.
Domestic Demand under Strain
Consumer spending, a key growth driver, has cooled amid rising living costs and cautious household sentiment. Retail sales and service sectors have shown modest gains, but not enough to offset higher energy and food prices.
Exports and Global Trade Pressures
On the trade front, exports declined as manufacturing orders from major partners eased. Global supply chains and a stronger yen in recent months have made Japanese goods less competitive abroad, weighing on tech and automotive sectors.
Tourism Hit by Warnings and Tensions
Tourism, once a recovery bright spot, is feeling the pinch. Warnings issued by the Chinese mainland authorities and broader regional political uncertainties have dampened arrivals. Visitors from the Chinese mainland, who accounted for nearly one-third of inbound tourists this year, felt the impact most acutely.
Looking Ahead
As 2025 draws to a close, policymakers and businesses are watching for signs of stabilization. Government stimulus and the Bank of Japan’s accommodative stance aim to cushion the slowdown, while companies explore new markets and supply chain innovations. For global investors and travelers, Japan’s resilience in the face of these pressures will be a key trend to watch.
Reference(s):
cgtn.com
