Japan’s Economy Shrinks as US Tariff Hit Looms 

The Tokyo Dome (L-white roof) and the Tokyo Skytree (back R) are pictured from the high-rise business district of Shinjuku on a hazy day in central Tokyo on May 16, 2025. (AFP)
The Tokyo Dome (L-white roof) and the Tokyo Skytree (back R) are pictured from the high-rise business district of Shinjuku on a hazy day in central Tokyo on May 16, 2025. (AFP)
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Japan’s Economy Shrinks as US Tariff Hit Looms 

The Tokyo Dome (L-white roof) and the Tokyo Skytree (back R) are pictured from the high-rise business district of Shinjuku on a hazy day in central Tokyo on May 16, 2025. (AFP)
The Tokyo Dome (L-white roof) and the Tokyo Skytree (back R) are pictured from the high-rise business district of Shinjuku on a hazy day in central Tokyo on May 16, 2025. (AFP)

Japan's economy shrank for the first time in a year in the March quarter, data showed on Friday, underscoring the fragile nature of its recovery now under threat from US President Donald Trump's trade policies.

The data highlights the challenge policymakers face as steep US tariffs cloud the outlook for the export-heavy economy, particularly for the mainstay automobiles sector.

Real gross domestic product (GDP) contracted an annualized 0.7% in January-March, preliminary government data showed, much bigger than a median market forecast for a 0.2% drop.

It followed a revised 2.4% increase in the previous quarter. On a quarter-on-quarter basis, the economy shrank 0.2% compared with market forecasts for a 0.1% contraction.

Private consumption, which accounts for more than half of Japan's economic output, was flat in the first quarter, compared with market forecasts for a 0.1% gain.

Capital expenditure increased 1.4% compared with market forecasts for a 0.8% gain, the data showed.

External demand, or net exports, shaved 0.8 percentage point off GDP growth, the data showed. Analysts polled by Reuters expected external demand, or shipments minus imports, to have shaved 0.6 point off GDP growth.

A global trade war touched off by Trump's sweeping tariffs has jolted financial markets and complicated the Bank of Japan's decision on when and how far it can push up interest rates.

Having exited a decade-long stimulus last year, the BOJ hiked rates to 0.5% in January and has signaled its readiness to keep hiking borrowing costs if a moderate economic recovery keeps Japan on track to durably hit its 2% inflation target.

But fears of a Trump-induced global slowdown forced the BOJ to sharply cut its growth forecasts at its April 30-May 1 policy meeting, and cast doubt on its view that sustained wage hikes will underpin consumption and the broader economy.

While a de-escalation of US-China trade tensions offered markets and policymakers some relief, there is uncertainty on whether Japan can win exemptions from US tariffs in bilateral trade talks with Washington.

The gloomy GDP data may also pile pressure on Prime Minister Shigeru Ishiba to heed lawmakers' demands to cut tax or compile a fresh stimulus package.



World Bank: New $250 Million Project to Kickstart Reconstruction in Lebanon

Cars and motorbikes drive near damaged buildings in Beirut southern suburbs, Lebanon June 23, 2025. REUTERS/Mohamed Azakir
Cars and motorbikes drive near damaged buildings in Beirut southern suburbs, Lebanon June 23, 2025. REUTERS/Mohamed Azakir
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World Bank: New $250 Million Project to Kickstart Reconstruction in Lebanon

Cars and motorbikes drive near damaged buildings in Beirut southern suburbs, Lebanon June 23, 2025. REUTERS/Mohamed Azakir
Cars and motorbikes drive near damaged buildings in Beirut southern suburbs, Lebanon June 23, 2025. REUTERS/Mohamed Azakir

The World Bank Board of Executive Directors has approved $250 million in financing for Lebanon to aid in the reconstruction of critical public infrastructure and the management of rubble in areas affected by the Israel-Hezbollah war.

“The Lebanon Emergency Assistance Project (LEAP) will prioritize and sequence interventions to maximize economic and social impact within the shortest timeframe and provide a phased approach to response, recovery and reconstruction,” the World Bank said in a statement on Wednesday.

The Rapid Damage and Needs Assessment (RDNA) of the impact of the conflict between Israel and Hezbollah between October 8, 2023, and December 20, 2024, estimated total direct damages across 10 sectors at $7.2 billion, and reconstruction and recovery needs at $11 billion.

Damage to critical infrastructure and buildings that are critical to economic activity and to the health and safety of communities was estimated at $1.1 billion across the transport, water, energy, municipal services, education and health care sectors. Considering the scale of needs, the LEAP was designed to support restoration of public infrastructure and buildings, given this is a precondition to economic and social recovery.

“Given Lebanon’s large reconstruction needs, the LEAP is structured as a $1 billion scalable framework with an initial $250 million contribution from the World Bank and the ability to efficiently absorb additional financing—whether grants or loans—under a unified, government-led implementation structure that emphasizes transparency, accountability, and results,” said World Bank Middle East Division Director Jean-Christophe Carret.

“This framework offers a credible vehicle for development partners to align their support, alongside continued progress on the Government’s reform agenda, and maximize collective impact in support of Lebanon’s recovery and long-term reconstruction,” he added.

The WB financing will support immediate response activities required to accelerate recovery and create the conditions that favor a return to normality, including the safe and well-planned management of rubble that maximizes the reuse and recycling of rubble. Critical support will also be provided to the rapid repair and recovery of essential services, such as water, energy, transport, health, education and municipal services.

The LEAP framework will also support the reconstruction of severely damaged infrastructure, starting with designs and environment and social assessments financed through WB initial financing.

To ensure the Project’s operational readiness and its efficient and prompt implementation, the Lebanese government has undertaken critical reform measures in the project’s implementing agency, the Council for Development and Reconstruction (CDR), the World Bank said in its statement.

The measures include the establishment of a complete and functional CDR Board of Directors and streamlining administrative and decision-making processing for the LEAP, in line with international best practices for emergency projects.