(Feb 16): Japan’s economy eked out growth in the fourth quarter of 2025, reversing from a deep contraction in the previous period, underscoring the case for Prime Minister Sanae Takaichi’s proactive spending policies following her historic election triumph.
Japan’s real gross domestic product grew 0.2% on an annualised basis in the three months through December, according to a Cabinet Office report Monday. That was weaker than economists’ median estimate of 1.6% growth.
Private housing investment rose 4.8% in real terms from the previous quarter, an expected outcome after a rout in the previous quarter that resulted from regulatory changes. Consumer spending, the biggest component of GDP, grew 0.1%, showing the fragility of domestic demand as households continue to cope with inflation that hovered above the Bank of Japan’s 2% target for four years through 2025. Capital spending rose 0.2%.
Monday’s figures underscore the patchy nature of an economic recovery that lacks a strong driver beyond one-off factors. Even so, the signs of tepid activity aren’t likely to derail the BOJ from raising the benchmark interest rate later this year.
“For the BOJ, the data would support its view that growth uncertainty is easing as US trade policy becomes clearer, allowing it to scale back stimulus gradually. We expect a 25-basis-point rate hike in July,” said Bloomberg Economics.
On the fiscal side, the report may add momentum to Takaichi’s push to support growth with government spending and targeted investments. Earlier this month the premier led her Liberal Democratic Party to the biggest post-war victory for a single-party in a general election, securing a mandate to push her expansionist policies.
See also: Russia cuts key rate to 15.5% despite uptick in inflation
The scale of her election victory quieted concerns preceding the vote that passage of the regular budget for the fiscal year starting in April might be delayed. With the LDP having garnered two-thirds of the powerful lower house, smooth passage of the budget is virtually assured.
Takaichi plans to expedite discussions on whether to temporarily suspend the sales tax on food and has said she’ll cover the lost revenue without relying on deficit-covering government bonds.
Uploaded by Magessan Varatharaja
