ABC: <\/p>\n\n\n\n
TOKYO —\u00a0The Japanese economy contracted at an annual rate of 0.7% in the first quarter, according to government data released Friday, as U.S. President\u00a0Donald Trump\u2019s trade war<\/a>\u00a0hurt exports and dented consumer confidence.<\/p>\n\n\n\n Japan\u2019s real gross domestic product, or the measure of a nation\u2019s goods and services, shrank at a greater-than-expected 0.2% in January-March compared to the previous quarter in the first contraction in a year, the Cabinet Office\u2019s seasonally adjusted preliminary data showed.<\/p>\n\n\n\n Exports declined at an annual rate of 2.3%. Consumer spending remained flat, while capital investment grew 5.8%.<\/p>\n\n\n\n Trump\u2019s tariffs are likely to hurt Japan\u2019s giant exporters, especially the automakers<\/a>, not only for products shipped from Japan, but from other nations, like Mexico and Canada. Officials acknowledge planning a response is a challenge because Trump keeps changing his mind.<\/p>\n\n\n\n \u201cRegional automakers face increased operating costs and potential revenue losses because their U.S. sales depend on diverse production bases and supply chains,\u201d S&P Global Ratings said in a report.<\/p>\n\n\n\n \u201cEven companies with minimal sales in the U.S. could face indirect but meaningful impacts as tariffs affect global economy and consumer demand,” it said.<\/p>\n\n\n\n The Japanese economy has been struggling for years, plagued by weak demand as the population ages and declines, as more people stay single and have fewer children.<\/p>\n\n\n\n The Bank of Japan<\/a>, which kept interest rates at zero or minus levels for years, has been gradually raising the benchmark rate, noting wages are holding up and prices are gradually rising.<\/p>\n\n\n\n The latest findings, which seem to highlight the fragility of the economy<\/a>, make it more likely the central bank might hold off on further rate hikes.<\/p>\n\n\n\n Some analysts are advocating lowering the 10% consumption tax, which is similar to the sales tax in other nations, to help alleviate people\u2019s hardships.<\/p>\n\n\n\n