Pedestrians stand in entrance of an digital citation board displaying the numbers of the Nikkei Inventory Common on the Tokyo Inventory Trade in Tokyo on Feb. 3, 2026.
Kazuhiro Nogi | Afp | Getty Photos
Japan’s financial system grew 0.1% within the fourth quarter of 2025 in contrast with the earlier three months, narrowly avoiding a technical recession.
Whereas it was a reversal of the 0.7% contraction within the third quarter, the gross home product missed expectations of a 0.4% enlargement by economists polled by Reuters.
A technical recession is often outlined as two consecutive quarters of contraction.
On an annualized foundation, output rose 0.2%, in contrast with forecasts of 1.6%, following a 2.3% decline within the earlier quarter.
In contrast with a 12 months earlier, fourth-quarter GDP expanded 0.1%, slowing from 0.6% within the third quarter. Personal consumption drove the modest enlargement, offsetting weak spot in exports and public spending, based on information from Japan’s Cupboard Workplace.
Following the information launch, the Nikkei 225 opened up 0.12%, however the yen weakened 0.25% to 153.06 in opposition to the greenback.
The Financial institution of Japan in January raised its financial progress forecast for the fiscal 12 months ending March 2026 to 0.9% from 0.7%. It additionally lifted its fiscal 2026 outlook to 1% from 0.7%.
The central financial institution mentioned it expects reasonable enlargement as different international locations return to progress. The BOJ additionally mentioned it sees a virtuous cycle of rising costs and wages, supported by the federal government’s financial measures and accommodative monetary situations.
The information additionally comes as Japan works with the U.S., its second-largest buying and selling associate, on a $550 billion funding pledge beneath its commerce take care of Washington.
Public broadcaster NHK reported final Friday that Tokyo and Washington have but to agree on the primary tasks tied to the pledge.
Japan Financial system Minister Ryosei Akazawa was quoted as saying he hoped the preliminary tasks could be finalized earlier than Prime Minister Sanae Takaichi meets U.S. President Donald Trump.
Trump had introduced the assembly with Takaichi simply earlier than the Feb. 8 Decrease Home election, which noticed Takaichi lead the ruling Liberal Democratic Social gathering to a landslide victory.
After her victory, Takaichi mentioned final Monday that she would assist financial progress by boosting funding by “proactive” fiscal coverage, though she didn’t elaborate.
She had earlier pledged to droop meals taxes for 2 years and enhance defence spending to 2% of the nation’s GDP.
Protection would be the subsequent main catalyst driving Japanese equities greater, mentioned Bruce Kirk, Chief Japan Fairness Strategist and managing director at Goldman Sachs.
Talking to CNBC’s “Squawk Field Asia,” Kirk pointed to Takaichi’s upcoming assembly with Trump, saying he expects a “flurry of bulletins” involving Japanese and U.S. corporations throughout areas comparable to industrialization, manufacturing facility automation, and shipbuilding.
Kirk additionally highlighted a doc launched by the Trump administration over the weekend that known as for the restoration of U.S. maritime dominance and touted cooperation with Japan and South Korea in revitalizing shipbuilding.
Earlier than the election, Takaichi had introduced a document 122 trillion yen funds for the fiscal 12 months beginning April 1, marking a second straight 12 months of document spending and vowing to assist households with cost-of-living pressures.
Japan’s inflation had slowed sharply to 2.1% in January, its lowest stage since March 2022. Nonetheless, costs have remained above the Financial institution of Japan’s 2% goal for 45 consecutive months.
— CNBC’s Martin Soong contributed to this report.
