Japan's economy shrank by 0.7% in the first three months of the year, the government said on Friday. This was partly 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% between January and March, which is not good. 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.

Trump's taxes on imports will probably affect big Japanese companies that sell things abroad, especially car companies. This will happen not just for products from Japan, but also from countries like Mexico and Canada. Government workers say it's hard to plan what to do because Trump changes his decisions 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 places to make things and different ways to get supplies.

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 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 bit.

The new information suggests the economy is not very strong. Because of this, the central bank might not increase interest rates again soon.

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

But Shigeru Ishiba, the Prime Minister, has not said yes to this idea yet. It's because Japan has money problems because they are spending a lot on social care.

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