Japan's economy grows 0.2% in Oct.-Dec., spending edges up, exports weak
TOKYO (Kyodo) -- Japan's economy grew by an annualized real 0.2 percent in the October-December period, the first expansion in two quarters, as personal consumption eked out a gain despite inflation, while exports fell after higher U.S. tariffs reduced auto shipments, government data showed Monday.
In the fourth quarter of 2025, gross domestic product adjusted for inflation increased by 0.1 percent from the July-September period, the Cabinet Office said in a preliminary report. GDP is the total value of goods and services produced in a country.
The expansion was widely anticipated but turned out to be far smaller than expected. Economists polled by the Japan Center for Economic Research had forecast an annualized real expansion of 1.48 percent.
For the whole of 2025, nominal GDP, which shows the size of the economy in current prices, rose 4.5 percent from the previous year to 662.79 trillion yen ($4.3 trillion). In real terms, GDP totaled 590.68 trillion yen, up 1.1 percent, according to the Cabinet Office.
In the reporting quarter, private consumption, accounting for over half of the economy, grew by 0.1 percent for the seventh consecutive quarterly rise, bolstered by robust demand for mobile phones and accommodation, though spending on food and automobiles declined, according to the office.
Takeshi Minami, chief economist at the Norinchukin Research Institute, said growth in consumption was slow in the quarter, even as companies agreed to offer higher wages for fiscal 2025 following negotiations with labor unions.
The focus going forward is on whether salaries will further rise in the next fiscal year starting April and boost spending, especially on food and travel, which were areas squeezed by inflation, he said.
While the year-on-year increase in core consumer prices excluding volatile fresh food could fall below 2 percent as soon as the January-March period, "it is important that consumers truly feel that inflation is easing for them to expand spending," Minami said.
During the reporting period, exports fell by 0.3 percent from July-September, dragged down by weak automobile shipments affected by U.S. President Donald Trump's tariffs, but the decline was milder than the 1.4 percent in the previous quarter.
A Cabinet Office official said that the higher tariffs do not seem to be casting a shadow over the broader Japanese economy, including the mindset of businesses and consumers, in the wake of a trade deal struck between Japan and the United States in mid-September.
"The U.S. tariffs impact remain, such as on automakers' profits, but uncertainties are receding over the outlook due to the implementation of the trade deal," the official said.
"But going forward, developments in trade relations outside of Japan and the United States, such as the United States and China or the European Union, could indirectly affect Japan's economy," the official said.
Lower spending by foreign visitors to Japan also contributed to the decline in exports, according to the Cabinet Office. Their spending is counted as exports in GDP data. Imports fell by 0.3 percent.
Business investment increased by 0.2 percent from the previous quarter due to strong demand for semiconductor manufacturing devices and research and development services, while companies also bought more software to make up for labor shortages, the official said.
Housing investment increased by 4.8 percent from the previous quarter following a sharp fall of 8.4 percent.
Nominal GDP increased by 0.6 percent from the July-September period, or at an annualized rate of 2.3 percent.
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