| Consensus | Consensus Range | Actual | Previous | Revised | |
| Quarter over Quarter | 0.4% | 0.2% to 0.6% | 0.1% | -0.6% | -0.7% |
| Annual Rate | 1.7% | 0.7% to 2.6% | 0.2% | -2.3% | -2.6% |
| Year over Year | 0.9% | 0.3% to 1.1% | 0.1% | +0.6% |
Highlights
Japan's economic growth in the final quarter of 2025 was nearly flat, up just 0.1% on quarter (0.053% to be more precise), or 0.2% (0.21%) annualized, coming in much weaker than expected as a rebound in business investment turned out to be tepid, public works spending fell more sharply than estimated and stiff U.S. tariffs choked exports of autos, metals and computer chips. Private consumption, which accounts for about 55% of the GDP, remains sluggish in the face of elevated costs for daily necessities and falling real wages, with its resilience fizzling out toward the end of the year when bad winter weather hampered economic activity. The Q4 growth barely made up for the degree of the economy's first contraction in six quarters in Q3, when it shrank a downwardly revised 0.7% q/q (2.6% annualized).
Domestic demand made virtually no contribution (+0.04 percentage point) to total domestic output, far below the positive 0.4 point anticipated by economists, while external demand as measured by net exports (exports minus imports) failed to lift the Q4 GDP very much, providing zero contribution (+0.02 point). Private consumption added just 0.1 (0.06) point and capex also disappointed with zero contribution (+0.04 point). Exports suffered a second consecutive q/q drop, hit by lower shipments of autos, computer chips and ships, but the pace of decline decelerated to -0.3% in Q4 from -1.4% in Q3, indicating easing effects of Trump tariffs. Imports also dipped 0.3% on quarter (computers, copper and autos were down).
Other details:
Japan Q4 real GDP +0.1% q/q; median economist forecast +0.4% (range +0.2% to +0.6%)
Japan Q4 real GDP +0.2% annualized; median forecast +1.7% (range +0.7% to +2.6%)
Japan Q4 GDP nearly flat after posting its first contraction in six quarters in Q3
Cabinet Office: Japan GDP must grow 1.67% q/q or 6.90% annualized in Q1 of 2026 to hit the official growth forecast of 1.1% in fiscal 2025 ending March
Japan economy unlikely to hit FY25 official GDP forecast, as economists expect only about 1% annualized growth in Q1 2026
Japan real Q4 GDP +0.1% y/y (Q3 +0.6%); median forecast +0.9% (range +0.3% to +1.1%)
Japan Q4 GDP domestic demand contribution +0.0 pct point (Q3 -0.4 point); median forecast +0.4 point
Japan Q4 GDP net exports contribution +0.0 pct point (Q3 revised -0.3); median forecast +0.1 pct point
Japan Q4 GDP private consumption +0.1% q/q vs. median forecast +0.2%; +0.1 point contribution
Japan Q4 GDP business investment +0.2% q/q vs. median forecast +0.7%; +0.0 point contribution
Japan Q4 GDP private inventory contribution -0.2 point (Q3 -0.1) vs. median forecast -0.1 point
Japan Q4 public investment -1.3% q/q (Q3 REVISED -1.5%) vs. median forecast -0.3%; -0.1 point contribution
Japan Q3 real GDP revised to -0.7% q/q from -0.6%
Japan Q3 real GDP revised to -2.6% annualized from -2.3%
Japan Q4 GDP unadjusted deflator +3.4% y/y vs. +3.5% in Q3
Japan Q4 GDP adjusted deflator +0.5% q/q vs. +0.6% in Q3
Japan Q4 GDP employee compensation real +0.5% q/q vs nominal +1.0% (real +0.1% in q3, +0.8% in q2, -0.9% in q1), showing inflation capping wage growth
Market Consensus Before Announcement
Backed by gains in capital investment, gradual rises in exports, and continuing modest recovery in private consumption, Japan’s real gross domestic product is expected to rebound and post its first positive growth in two quarters in the October–December period, following a sharp contraction in the previous quarter. Still, the recovery lacks clear drivers, as both capital expenditure and consumption remain short of strong momentum, with prices continuing to trend higher.
Preliminary Q4 GDP data due from the Cabinet Office at 8:50 a.m. JST on Monday, Feb. 16 (2350 GMT/1850 EST, Sunday, Feb. 15), is forecast to rise 0.4 percent from the previous quarter, or an annualized gain of 1.7 percent, after falling 0.6 percent, or an annualized drop of 2.3 percent, in the July–September period, which marked the first contraction in six quarters.
Consensus forecasts for key components in percentage change on quarter except for domestic demand, private inventories and net exports, whose contributions are in percentage points. Figures in the previous quarter are in parentheses:
GDP q/q: +0.4% (-0.6%); 1st rise in 2 qtrs
GDP annualized: +1.7% (-2.3%); 1st rise in 2 qtrs
GDP y/y: +0.9% (+0.6%); 6th straight rise
Domestic demand: +0.4 point (-0.4 point); 1st rise in 2 qtrs
Private consumption: +0.2% (+0.2%); 7th straight rise
Business investment: +0.7% (-0.2%); 1st rise in 2 qtrs
Public investment: -0.3% (-1.1%); 3rd straight drop
Private inventories: -0.1 point (-0.1 point); 2nd straight drop
Net exports (external demand): +0.1 point (-0.2 point), 1st rise in 2 qtrs
Definition
Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy.
Description
Gross domestic product is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios.
The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.