Core Viewpoint - Japan's economy has experienced a downturn after five consecutive quarters of growth, with a 1.8% year-on-year decline in GDP for Q3 2025, marking the first negative growth in six quarters [1][10]. Group 1: Economic Performance - The GDP decreased by 0.4% on a quarter-on-quarter basis, slightly better than the market expectation of a 0.6% decline, indicating a loss of growth momentum for the world's fourth-largest economy [1]. - The decline in Japan's economy is attributed to simultaneous downturns in exports, housing investment, and private consumption, which are considered the three main drivers of economic growth [3]. Group 2: Export and Trade Impact - Japan's goods and services exports fell by 1.2% quarter-on-quarter, significantly impacted by U.S. tariff increases, particularly affecting the automotive sector, which saw a substantial drop in export volumes [4][6]. - The contribution of external demand to GDP growth was negative by 0.2 percentage points due to the decline in exports, which account for 20% of Japan's total exports [7]. Group 3: Domestic Consumption and Investment - Private consumption, which constitutes over half of Japan's economy, showed minimal growth of only 0.1% quarter-on-quarter, a slowdown from 0.4% in the previous quarter [5]. - Housing investment experienced a dramatic decline of 9.4% quarter-on-quarter, linked to stricter energy efficiency regulations introduced in April [4]. Group 4: Policy Response and Future Outlook - In response to economic contraction, the Japanese government is accelerating fiscal measures, with an economic stimulus plan exceeding 17 trillion yen (approximately $109.9 billion) aimed at alleviating the impact of rising living costs and boosting investment in growth sectors like AI and semiconductors [9]. - Economists generally view the current economic data as a temporary setback rather than the beginning of a recession, with expectations of gradual recovery over the next one to two years despite underlying issues such as stagnant real wages and rising food costs [11].