According to government figures released on Friday, the Japanese economy shrank by 0.7% annually in the first quarter, as exports suffered from the trade dispute initiated by US President Donald Trump, and consumer confidence weakened.

La economía japonesa se redujo un 0,2% en el primer trimestre del año, según datos preliminares de la Oficina del Gabinete, lo que supone la primera caída en un año y supera las previsiones de los expertos.

Exports fell by 2.3% compared to last year. Consumer spending remained steady, but capital investment increased by 5.8%.

Trump's tariffs could harm major Japanese exporters, especially car manufacturers, not only on products shipped from Japan but also from countries like Mexico and Canada. Officials admit that planning a response is difficult because Trump's stance keeps changing.

"S&P Global Ratings stated in a report that regional car manufacturers are facing increased running costs and potential profit decline, as their US sales rely on varied production locations and supply networks."

Even businesses with limited sales in the US could experience noticeable indirect effects as tariffs influence the global economy and consumer demand.

The Japanese economy has faced challenges for years, struggling with low demand due to its aging and shrinking population, as more people are single and have fewer children.

Having kept interest rates near zero for a long time, the Bank of Japan has slowly started to raise them, pointing to stable wages and a gradual rise in prices.

Recent findings, which highlight the economy's vulnerability, increase the likelihood that the central bank will refrain from further rate hikes.

Some experts suggest lowering the 10% consumer tax, similar to sales taxes in other countries, to ease financial burdens on people.

However, Prime Minister Shigeru Ishiba has yet to express his support for the proposal, as Japan's national finances are already strained by rising social welfare costs.

The economy saw an annual growth rate of 2.4% in the final quarter of 2024.