STAGFLATION RESHUFFLES THE DECKS FOR JAPANESE ASSETS 1/3

The Japanese economy stalled abruptly in Q3 2025, ending a streak of consecutive growth quarters with a GDP contraction of -0.4% (-1.8% annualized). This performance, while slightly better than the feared -0.6% decline, marks the first contraction since early 2024 and signals a definitive shift in growth dynamics. The primary driver was a negative contribution from foreign trade, specifically a sharp -1.2% drop in exports. This reversal is directly attributable to the implementation of new US tariffs in September, which severely impacted shipments of automobiles and manufactured goods.