Japan’s economy recovers moderately despite U.S. tariffs

Japan’s government acknowledged its concerns about the risks from U.S. tariffs on economic growth in a monthly report on Wednesday. The government stated that the potential impact on corporate profits needed attention. 

Japan’s economy faces pressure from U.S. import tariffs of 24% from July unless officials can negotiate them down. The country is also seeking an exemption for carmakers from a separate 25% import levy on vehicles.

Japan’s economy recovers moderately despite U.S. tariffs

Japan warns of risks from upcoming 24% U.S. tariffs impacting corporate profits & economic growth. GDP dipped early 2025; price rises weigh on consumption. Watch for delayed effects in Q2+ data. #JapanEconomy #USTariffs #TradeWatch #MarketUpdate #IXBroker pic.twitter.com/rR4yozTAHn

— iX Broker (@ixbroker) June 11, 2025

Japan’s gross domestic product shrank at an annualized pace of 0.2% in the first quarter of 2025. Its GDP declined even before U.S. President Donald Trump imposed his so-called reciprocal tariffs on April 2.

The Cabinet Office mentioned in its monthly report for June released on Wednesday that the economy is recovering moderately, despite uncertainty arising from U.S. trade policies. The report also maintained its reference to the effect of continued price rises on household sentiment and consumption as another negative risk to the economy. According to the report, corporate profits were recovering, citing first-quarter business statistics, but added a fresh reference to the potential impact of trade disruptions.

An official at the Cabinet Office told a press briefing that the impact on earnings on some companies may come to light in the data for the April-June quarter or beyond since some have withheld financial forecasts amid uncertainties surrounding U.S. levies.  Nikkei reported that the adjustment reflects the possibility that data from the April-June quarter onward may begin to show clearer effects of U.S. tariff actions.

The official also noted that trade trends from May onwards required attention because there has been no significant impact from U.S. tariffs on Japan’s export volumes so far. The official also referred to the national labor group Rengo’s data, arguing that this spring’s pay negotiations probably led to an average raise of more than 5%, exceeding last year’s.

The fragile economy and precarious trade diplomacy pose a major challenge for Prime Minister Shigeru Ishiba, who will face a key Upper House election next month. Ishiba mentioned earlier this week that his ruling party would pledge to achieve growth of more than 50% in Japan’s average income by 2040 in campaigning for the Upper House elections. 

The Prime Minister recently reintroduced relief measures for households in a bid to alleviate public frustration over rising prices. The measures included the resumption of utility subsidies and the release of government rice stockpiles into the retail market.

Japan aims for a full reversal of tariffs 

Japan, the most likely country to bend the knee is not backing down when faced with extortion from the US.

Japan trade representative states that eliminating all new tariffs are non-negotiable. pic.twitter.com/v8qbW2j1GM

— Zhao DaShuai 东北进修🇨🇳 (@zhao_dashuai) April 20, 2025

Ishiba’s government is still negotiating with Washington as several critical deadlines approach in July, including Japan’s vote and the expiration of a 90-day grace period that temporarily reduced Trump’s reciprocal tariffs. Japan quickly initiated talks but now appears to lag behind other nations, as the U.S. has already reached an agreement with the United Kingdom and a temporary truce with China.

Japan’s lead trade negotiator, Ryosei Akazawa, acknowledged that progress is being made, but Japan and the U.S. haven’t agreed following his fifth round of talks with U.S. officials. At a Tuesday news conference, he said that a clear path toward common ground has yet to be found. 

“We’re negotiating with the strong desire to eliminate that burden as quickly as possible.”

-Ryosei Akazawa, Minister of Economic Revitalization of Japan. 

Ishiba is expected to hold talks with Trump on the sidelines of the Group of Seven summit gathering from June 15 to 16 in Kananaskis, Alberta, Canada. According to reports, Akazawa also plans to visit the U.S. again on Friday to hold another round of negotiations with his American counterparts. 

Akazawa also confirmed on Monday that Japan is still aiming for a full reversal of all tariff measures imposed by the U.S., which currently includes a 25% tariff on vehicles and auto parts, a 50% tax on steel and aluminum and a 10% baseline duty on almost all other imports.

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