Japan's economy shrank by 0.7% per year in the first three months of the year, said the government on Friday. This happened because trade issues with the U.S. affected exports and made people less sure about spending money.

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

Exports went down by 2.3% per year. People spent about the same amount of money as before, but businesses invested 5.8% more.

Trump's taxes on imports will probably affect big Japanese companies that export a lot, especially car companies. This will be a problem for products sent from Japan, but also from other countries like Mexico and Canada. People in charge say it's hard to plan what to do because Trump changes his plans often.

S&P Global Ratings said that car companies in some areas may have higher costs and less money coming in. This is because their sales in the U.S. need different factories and supplies.

The report said that even if companies don't sell much in the U.S., they 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 and prices are going up a little.

The newest information suggests the economy is not very strong. Because of this, the central bank might not increase interest rates any further.

Some experts suggest reducing the 10% tax on goods to help people who are having a difficult time. This tax is like the sales tax in other countries.

But Shigeru Ishiba, who is the Prime Minister, has not said yes to it yet. It's because Japan has money problems, as they need to pay a lot for social care.

The economy got bigger by 2.4% per year at the end of 2024.