Japan's economy holds steady at half-year mark despite Trump tariffs

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The Japanese economy grew at a better than expected 1% annual pace in the last quarter, boosted by exports that held up despite US President Donald Trump’s higher tariffs.

The US has imposed a 15% tax on imports from Japan. That's higher than before for some products but down from the 25% tariff Trump announced earlier.

Real gross domestic product (GDP), which measures the total value of a nation’s goods and services, expanded 0.3% in the fiscal first quarter compared to the previous quarter, beating analysts' estimates.

It was Japan's fifth straight quarter of growth.

Tourism boosts Japanese economy

Japan's exports grew 2.0% in the period, according to preliminary data from the Cabinet Office. A 90-day pause on higher tariffs for most goods and most trading partners enabled companies to rush some exports to try and beat the higher import duties.

But the 15% tariffs took effect as of last week, closing that window.

A surge in visits by foreign tourists has also helped, though it has also raised resentment among some Japanese upset over various aspects of dealing with outsiders.

Apart from exports, capital investment rose 1.3% from a year earlier, helping to drive faster growth. But consumer spending remained relatively weak, growing just 0.2%.

Prices rise but wage growth slows

Prices have been rising steadily while wages have stagnated.

The stronger than expected economic performance in the last quarter raises the likelihood that Japan's central bank may push ahead with raising its benchmark interest rate from its longstanding level near zero to help cap inflation.

The higher tariffs that Trump has imposed to try to get companies to increase manufacturing in the United States have added to pressure on Prime Minister Shigeru Ishiba, who is facing calls to resign after the ruling Liberal Democrats and their coalition partner, Komeito, failed to win majorities in both houses of the parliament.