Raising hurdles for the nation's policymakers and central banks, Japan's real gross domestic product (GDP) shrank by 0.2% in the first quarter, or at a 0.7% annual rate, reported the Cabinet Office on Friday.

On year, Japan's first quarter real GDP was up 1.7% from a low base of a year earlier, added the Cabinet Office.

Since the COVID-19 pandemic, Japan's real GDP has moved in and out of real growth, often from quarter to quarter, resulting in a modest overall expansion.

In 2022, the Japan's real GDP expanded by 1.3% on year, followed by a 0.6% expansion in 2023, and then a 0.8% increase in 2024.

For 2025, the nation's real GDP is expected to expand by 0.5% on year, estimated the Bank of Japan, in a report issued at the start of May.

In the first quarter of 2025, Japan's real exports of goods and services shrank at a 2.3% annual rate, while private consumption inched up by a scant 0.2% annual rate.

The Bank of Japan has publicly promoted a monetary policy that would remain firm enough to boost real wages, and consequently expand consumer spending and private demand, and thus boost the overall economy.

At the same time, Japan has been incurring an inflation rate on its consumer price index-core (CPI-core) near 3%, including a 3.2% on-year reading in March, which is above the Bank of Japan's 2% annual target by the metric.

The Bank of Japan in 2024 raised its key policy interest from negative 0.1% to positive 0.1% March, and then in stages to 0.5% in March of 2025, but since the central bankers have voted to pause rate hikes in two successive policy sessions.

The Bank of Japan's policy-making session next meets on June 17 though June 18.