The Japanese economy shrank by 0.7% per year in the first three months of the year, said government reports on Friday. This happened because trade problems caused by U.S. President Donald Trump made exports worse and people felt less sure about spending money.

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

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 money.

Trump's taxes on imports will probably affect big Japanese companies that sell things to other countries, especially car companies. This will happen not just for things sent from Japan, but also from countries like Mexico and Canada. People in charge know that it's hard to plan what to do because Trump changes his mind a lot.

S&P Global Ratings said that car companies in some areas might have higher costs and lower sales. 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 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 starting to go up.

The newest information suggests the economy is not very strong, so the central bank will probably not increase interest rates again soon.

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

But Shigeru Ishiba, the Prime Minister, has not said he likes the idea yet. It is hard for Japan to pay for things now because social care is costing more and more money.

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