The Japanese economy shrank by 0.7% per year in the first three months of the year, said the government on Friday. This happened because trade problems with the U.S. and President Trump made it harder to sell goods and made people less sure about spending money.

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

The amount of 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 Japan's big companies that sell a lot of products abroad, especially car companies. This will happen 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 lower sales. This is because their factories and suppliers are in different places, 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 while. This is because not enough people are buying things, as the population is getting older and smaller, and more people are not getting married or having kids.

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

The newest information shows that the economy may be weak, so the central bank might not increase interest rates again soon.

Some experts think that reducing the 10% tax on things we buy could help people who are having a hard time. This tax is like the sales tax in other countries.

But Shigeru Ishiba, the Prime Minister, has not said if he likes this idea yet. It is hard for Japan to pay for everything because social welfare costs are getting very high.

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