Japan Economy Expands Slightly In Q4, Growth Falls Short Of Forecasts

Japan’s latest GDP figures show modest growth in Q4 2025, with a quarterly expansion of just 0.1%. This marks a turnaround from the 2.6% contraction in the previous quarter, but the pace of recovery remains sluggish compared to forecasts. Economists had expected stronger momentum, pointing to lingering cost pressures and subdued household spending as key drags.  

Business investment and government expenditure provided positive contributions, while net trade also supported growth. Yet, private consumption grew at its slowest pace in a year, reflecting cautious consumer sentiment amid inflationary pressures. Analysts suggest that Japan’s economy is struggling to achieve balanced growth, with external demand and fiscal support offsetting domestic weakness.  

Looking ahead, policymakers face the challenge of sustaining recovery while managing inflation and structural reforms. The weaker-than-expected rebound raises questions about Japan’s resilience in 2026, especially as global economic uncertainties continue to weigh on trade and investment flows.  

Key Highlights  

• Japan’s economy grew 0.2% annualized in Q4 2025  
• Quarterly GDP rose 0.1%, reversing Q3 contraction  
• Growth fell short of 1.6% forecast by economists  
• Business spending, net trade, and government expenditure supported rebound  
• Private consumption remained weak due to cost pressures  

Sources: Reuters, CNBC, Trading Economics