TOKYO (AP) — Japan’s economy experienced a contraction at an annual rate of 2.3% during the July-September period, as reported by the government on Monday. This decline has been attributed to a reduction in exports, heavily impacted by the tariffs imposed by U.S. President Donald Trump, as well as a drop in public investments.

The contraction in Japan’s gross domestic product (GDP), which represents the total value of goods and services produced, translates to a 0.6% decrease on a quarter-by-quarter basis. This reflects a downward revision from preliminary data released last month, which indicated a decrease of 1.8% on an annualized basis, or 0.4% quarterly, according to the Cabinet Office. The annualized figure illustrates the rate at which the economy would have contracted if the same pace continued for a full year.

During this quarter, exports fell by 1.2% compared to the previous quarter, remaining consistent with preliminary figures. Private residential investment saw a more significant decrease of 8.2%, although this was an improvement from the previously reported 9.4% decline.

Earlier this year, Trump initiated higher tariffs on imports from multiple countries, which have now significantly impacted Japan’s trade landscape. In September, the U.S. government adjusted the tariffs on nearly all Japanese imports from a planned 25% surcharge down to 15%. The auto sector has been notably affected by these tariffs, presenting serious challenges to Japan’s economic structure. In a bid to ease tensions during the tariff negotiations, Japan has pledged to invest $550 billion in the United States.

Analysts suggest that the slump in private residential investment in the July-September quarter was primarily due to revisions in Japan’s building codes that resulted in a notable decrease in housing starts seen earlier in the year. Furthermore, imports experienced a slight decline of 0.4% over the same period, while private consumption showed a modest increase of 0.2%, according to the revised data.

The imposition of tariffs has caused strain in the diplomatic relations between Japan and the U.S., the latter being Japan’s most significant alliance partner. In recent political developments, Japan now has its first female prime minister, Sanae Takaichi, who is currently gaining popularity due to her assertive, nationalistic rhetoric. Although she is fostering optimism for an economic revival, the overall prospects for recovery remain uncertain.

Yuri Kageyama is on Threads: https://www.threads.com/@yurikageyama