Japan's economy got smaller by 0.7% in the first three months of the year, the government said on Friday. This happened because trade problems with the U.S., caused by President Trump, made it harder to sell goods to other countries and made people less sure about spending money.

Japan's economy got smaller by 0.2% between January and March, which is worse than expected. This is the first time it has shrunk in a year, according to early information from the government.

The amount of goods sold to other countries went down by 2.3% per year. People spent the same amount of money as before, but businesses invested 5.8% more money.

Trump's taxes on imports may cause problems for big Japanese companies that sell a lot of products abroad, especially car companies. This is not just for products sent from Japan, but also from countries like Mexico and Canada. Government workers say it's hard to plan what to do because Trump often changes his plans.

S&P Global Ratings said that car companies in some areas may have higher costs and less money coming in. This is because they make cars in different places and get parts from many suppliers, and their sales in the U.S. depend on this.

The report said that even companies that don't sell much in the U.S. might still be affected because tariffs can change the world economy and what people want to buy.

Japan's economy has had problems for a long time because fewer people are buying things as the population gets older and smaller, and more people are single and have fewer kids.

The Bank of Japan had very low interest rates for a long time. Now, they are slowly increasing them because wages are staying the same and prices are going up a little.

The new information suggests the economy is weak, so the central bank might not increase interest rates.

Some experts think the 10% tax on things we buy should be lower. This tax is like the sales tax in other countries. They think it would help people who are having a hard time.

But Shigeru Ishiba, who is the Prime Minister, has not said he agrees with this idea yet. It's because Japan has money problems, as they need to pay a lot for social welfare.

The economy grew by 2.4% each year in the last three months of 2024.