Japan’s GDP contracted 0.4% qoq in Q3 2025, reversing an upwardly revised 0.6% expansion in Q2, though slightly better than market estimates of a 0.6% decline, preliminary data showed. It was the first quarterly drop since Q1 2024, driven by subdued private consumption (0.1% vs 0.4% in Q2) amid persistent cost pressures, especially higher rice prices that continued to strain household budgets. Net trade also contributed negatively (-0.2ppts), as exports (-1.2% vs 2.3%) fell more than imports (-0.1% vs 1.3%), hit by U.S. tariffs after Washington imposed a 15% baseline levy on nearly all Japanese goods in September. Still, government spending (0.5% vs 0.1%) and business investment (1.0% vs 0.8%) posted their strongest gains in five quarters. The weak data comes as Prime Minister Sanae Takaichi’s new administration prepares a stimulus package to ease the burden of rising living costs on households.