Economy
Tax U-Turn
UK Income Tax Hike in Doubt, Bonds Sell Off
11/14/2025
11/17/2025
Japan’s economy shrank for the first time in six quarters, down 1.8% in the third quarter compared to a year before. On a quarter-to-quarter basis, the GDP shrank 0.4%.
The culprit? Mainly the US tariffs. Japanese companies tried cutting prices to soften the blow, but exports still dragged growth.
Some relief is expected this quarter, after the US–Japan deal lowered tariffs on nearly all Japanese goods to 15% in September. Earlier, the US had imposed much steeper rates: 27.5% on cars and 25% on most other products.
Japanese automakers were hit particularly hard. Companies like Toyota, Nissan, and Honda had rushed to export cars just before the tariffs came into effect, and now saw shipments plunge.
Private consumption grew 0.1%. Tiny, yes — but it’s still one of the few positives in the report. Families are squeezed by higher food costs, yet they kept spending just enough to nudge the number upward. Government consumption also added a dull shine, as public spending helped offset some of the drag.
The Japanese government is preparing a huge support package, under the new prime minister, Sanae Takaichi.
The stimulus is set to be larger than 17 trillion yen (over $100 billion), the Japanese finance minister confirmed on Sunday. Some key government advisers are reportedly pushing for even larger figures.
The goal: help households manage rising costs and give the economy a big push towards growth. Takaichi is a supporter of Abenomics, a stimulus-led approach to governing, spearheaded by former prime minister Shinzo Abe.
The new prime minister is due to meet with Bank of Japan Governor Kazuo Ueda later this week — her first formal sit-down since taking office.
The central bank is independent, but Takaichi has made clear she wants loose policy to support her stimulus plans. Ueda, meanwhile, has hinted at a possible rate hike as soon as next month.
These are opposing approaches: one side pushing for cheap money and growth, the other eyeing tighter policy to rein in inflation. Investors are watching closely to see which path Japan takes.