Japan's economy shrank by 0.7% in the first three months of the year, said the government on Friday. This was because trade problems with the U.S. and Donald Trump made it harder to sell goods abroad and made people less sure about spending money.

Japan's economy got smaller by 0.2% in January-March, which is more than experts thought. This is the first time it has shrunk in a year, according to early numbers from the government.

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

Trump's taxes on imports may cause problems for big Japanese companies that export a lot, 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 might have higher costs and less money coming in. This is because they sell cars in the U.S., and they need different factories and supplies to do 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 children.

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.

The new information shows the economy is not very strong. Because of this, the central bank will probably not increase interest rates soon.

Some experts suggest reducing the 10% tax on things people buy to help them with their problems. 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 is hard for Japan to pay for everything because social welfare is costing more and more money.

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