Official data released on Monday showed that Japanese economic growth in late 2025 fell below market expectations, putting pressure on Prime Minister Sanae Takaichi to boost activity following her recent election victory.
The country’s gross domestic product (GDP) expanded by only 0.1 percent in the fourth quarter, falling short of the anticipated 0.4 percent growth.
This growth came after a 0.7 percent decline in the previous quarter, which was revised from an initial estimate of -0.6 percent.
The cabinet office data indicated that growth in private consumption, as well as investments in private residences and businesses, drove the overall expansion.
For the entire year of 2025, Japan’s economy grew by 1.1 percent, rebounding from a 0.2 percent contraction in 2024, according to the cabinet office figures.
On an annualized basis, GDP increased by 0.2 percent in the last three months of the year, significantly lower than the expected 1.6 percent growth forecast by economists.
Prime Minister Takaichi, who assumed office in October as Japan’s first female prime minister, secured a decisive victory in snap elections held on February 8, with her Liberal Democratic Party (LDP) winning a historic two-thirds majority in the lower house.
In a bid to stimulate growth, Takaichi’s government introduced a 21.3-trillion-yen ($139 billion) stimulus package in November, encompassing energy subsidies, cash grants, and investment incentives in strategic sectors like semiconductors and artificial intelligence.
The package also allocated funds for increased defense spending amidst rising military activities by China in the region.
Despite these efforts, concerns have been raised among investors over Japan’s substantial debt, which exceeds twice the size of its economy, making it the most indebted among advanced economies.
Recent measures by Takaichi, such as temporarily exempting food from consumption tax to alleviate inflation’s impact on households, have led to record-high yields on long-term Japanese bonds.
Marcel Thieliant from Capital Economics suggested that the modest economic rebound might prompt Takaichi to consider further fiscal easing, potentially introducing a supplementary budget earlier than expected.
However, despite the weak growth, economists do not anticipate that the Bank of Japan will delay its plans to raise interest rates later in the year.
