Japan’s economy avoids technical recession, but fourth-quarter rebound misses expectations
Pedestrians stand in front of an electronic quote board showing Nikkei Stock Average figures at the Tokyo Stock Exchange on February 3, 2026 in Tokyo.
Kazuhiro Nogi | Afp | Getty Images
Japan’s economy narrowly avoided a technical recession, growing by 0.1% in the fourth quarter of 2025 compared to the previous three months.
While the 0.7% contraction in the third quarter was reversed, gross domestic product failed to meet the 0.4% growth expectations of economists surveyed by Reuters.
A technical recession is generally defined as two consecutive quarters of contraction.
On an annual basis, production increased by 0.2% compared to forecasts of 1.6%, following a 2.3% decline in the previous quarter.
Compared with the previous year, GDP increased by 0.1% in the fourth quarter, slowing from 0.6% in the third quarter. Private consumption triggered moderate expansion, offsetting weakness in exports and public spending, data from Japan’s Cabient Office showed.
After the data is published, Nikkei 225 0.12% opened but yen It decreased by 0.25 percent against the dollar to 153.06.
Bank of Japan in January raises economic growth forecast In the fiscal year ending March 2026, it increased from 0.7% to 0.9%. It also raised its 2026 fiscal outlook to 1% from 0.7%.
The central bank said it expects moderate expansion as other countries return to growth. The BOJ also said it sees a virtuous cycle in which prices and wages rise, supported by government economic measures and supportive financial conditions.
The data also comes as Japan is working with the United States, its second-largest trading partner, on a $550 billion investment pledge under its trade deal with Washington.
Public broadcaster NHK reported It was stated last Friday that Tokyo and Washington had not yet agreed on the first projects linked to the commitment.
Japanese Economy Minister Ryosei Akazawa was quoted as saying that he hopes the first projects will be completed before Prime Minister Sanae Takaichi meets with US President Donald Trump.
Trump announced his meeting with Takaichi just before the Feb. 8 Lower House elections, in which Takaichi led the ruling Liberal Democratic Party to a landslide victory.
After your victory, Takaichi said Last Monday, he announced that he would support economic growth by increasing investments through “proactive” fiscal policy, but did not provide detailed information.
He had previously promised to suspend food taxes for two years and increase defense spending to 2% of the country’s budget.
before the electionTakaichi marked his second consecutive year of record spending by announcing a record 122 trillion yen budget for the fiscal year starting April 1 and vowed to support households with cost-of-living pressure.
Japan’s inflation slowed sharply in January, falling to 2.1%, its lowest level since March 2022. Still, prices have remained above the Bank of Japan’s 2% target for 45 consecutive months.
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