Japan's Economy Narrowly Avoids Recession with Modest Q4 Growth

Japan's economy expanded by 0.1% in the fourth quarter of 2025, based on a comparison with the preceding three months. This growth enabled the country to narrowly avoid a technical recession.

A technical recession is defined as two consecutive quarters of economic contraction. The prior quarter, Q3 2025, had seen a 0.7% contraction.

Growth Below Expectations

The fourth-quarter gross domestic product (GDP) growth of 0.1% was below the 0.4% expansion anticipated by economists in a Reuters poll.

On an annualized basis, Japan's output increased by 0.2%, which was less than the 1.6% forecast. This followed a 2.3% decline in the third quarter. Year-over-year, the fourth-quarter GDP grew 0.1%, a decrease from the 0.6% growth observed in the third quarter.

Key Drivers and Market Reaction

Data from Japan's Cabinet Office indicated that private consumption was the primary contributor to this expansion, effectively counteracting declines in exports and public spending.

Following the release of these economic figures, the Nikkei 225 stock index opened with a 0.12% increase. Concurrently, the yen depreciated by 0.25% against the dollar, trading at 153.06.