Japan GDP Growth: Tariffs Boost Second Quarter Expansion

Japan’s economy expanded 0.3% in the second quarter of 2025 compared to the first three months of the year, beating forecasts despite tariff headwinds out of the United States.

This was compared to the revised 0.1% growth seen in the first quarterand was higher than the 0.1% increase expected by economists polled by Reuters.

The GDP beat can be mainly attributed to net exports, which contributed 0.3 percentage points to GDP growth.

On a year-over-year basis, Japan’s GDP expanded 1.2% in the second quarter, falling short of the first quarter’s 1.8% growth.

The country’s GDP grew 1% on an annualized basis, beating the 0.4% rise expected by the Reuters poll.

This comes as Japan struggled to cope with an uncertain trade environment in the second quarter, with the country only reaching a trade deal with the U.S. on July 23.

The deal sees Japan face a 15% blanket tariff on all exports to the U.S., including automobiles.

Throughout the second quarter, Japan was spared the 24% tariff that was announced on “Liberation Day,” but had to face 25% duties on its key automobile sector.

Auto exports to the U.S. are a cornerstone of Japan’s economy, making up 28.3% of all shipments in 2024, according to customs data.

After its July 31 meeting, the Bank of Japan upgraded its forecast for the country’s economy to grow 0.6% in its 2025 fiscal year, running from April 2025 to March 2026.

However, the central bank also cautioned that trade and other policies globally would lead to a slowdown in overseas economies, as well as a decline in domestic corporate profits.

— This is breaking news, please check back for updates.