Under the heavy pressure of tariffs, exports are hindered, and Japan's economy may fall into contraction in the third quarter

According to the Zhitong Finance APP, a survey of economists shows that the Japanese economy, after five consecutive quarters of growth, may experience a contraction in the third quarter due to the impact of tariff actions initiated by U.S. President Trump on Japanese exports. Based on the median estimates of 58 economists, Japan's third-quarter Gross Domestic Product (GDP) is expected to decline by 1.2% year-on-year. In a previous survey, economists had originally expected Japan's third-quarter GDP to see a slight increase of 0.1% year-on-year—if this expectation had materialized, Japan's economic expansion would have continued into the sixth quarter. Japan's third-quarter GDP data will be released on November 17.

The potential economic downturn may provide more support for the economic stimulus plan to be launched this autumn by the new president of the Liberal Democratic Party, Sanae Takaichi, who is almost certain to become the next Prime Minister of Japan. Takaichi will face a series of economic challenges, from inflationary pressures to trade tensions, but her top priority is to consolidate governing support and prepare for a possible upcoming meeting with U.S. President Trump.

Signs of economic growth being hindered may also force the Bank of Japan to slow down its pace of interest rate hikes. Last week, Bank of Japan Governor Kazuo Ueda stated that he remains open to the possibility of raising interest rates in the short term, but emphasized the need to closely monitor the impact of U.S. tariffs on the economy. The Bank of Japan is expected to announce its next monetary policy decision on October 30.

Economists surveyed believe that Japan, as the world's fourth-largest economy, is significantly impacted by U.S. tariffs, with third-quarter exports expected to decline by 4% quarter-on-quarter, a larger drop than the previously estimated 3.1%.

Data shows that Japan's exports fell in both July and August, with a particularly noticeable decline in exports to the United States. Although Japan and the U.S. reached a trade agreement at the end of July, fixing the tariff rate on Japanese export goods at 15%, this level is still higher than before. This puts pressure on the profits of Japanese export companies. Many companies seem to have chosen to lower prices to absorb part of the tariff impact, in order to alleviate the burden on consumers.

In addition, economists expect Japan's private consumption to grow by 0.5%, mainly benefiting from wage increases resulting from this spring's labor negotiations. However, Japan's core inflation indicator remains well above the Bank of Japan's target of 2%, continuously eroding the purchasing power of Japanese households