TOKYO, Feb 6 - Japan's economy is projected to have resumed growth in the final quarter of 2025, driven by strong business investment and continued consumer spending, according to the median view from a poll of 16 economists. On an annualised basis, real gross domestic product is estimated to have expanded 1.6% in October-December, following a 2.3% decline in July-September, which was the largest quarterly drop in two years.
Measured without annualisation, the October-December expansion is judged to be 0.4% for the quarter. Market analysts see the rebound after the previous quarter's downturn as evidence that the economy remains on a measured recovery trajectory, rather than signalling a sustained acceleration.
Private consumption - which accounts for more than half of GDP - is forecast to have increased by only 0.1% in the fourth quarter as consumer inflation remained above the Bank of Japan's 2% target, weighing on household spending growth. By contrast, capital expenditure is estimated to have advanced 0.8% in October-December, reversing a 0.2% contraction in the prior quarter. The rise in business investment is attributed to upbeat corporate sentiment: a BOJ survey in December found confidence among large manufacturers at a four-year high.
Net external demand, defined as exports minus imports, likely contributed 0.1 percentage points to fourth-quarter GDP growth, after subtracting 0.2 points in the third quarter when U.S. tariffs initially dented exports. The smaller negative impact from trade, relative to the previous quarter, has been cited as a factor helping overall growth.
Policy developments have mirrored the more resilient outlook. In December the Bank of Japan raised its policy rate to 0.75% from 0.5%, and in the subsequent month the central bank upgraded its forecasts for growth and inflation. Meanwhile, Japanese Prime Minister Sanae Takaichi - who was positioned for a significant victory in a snap election held on Sunday - pledged to stimulate the economy through proactive fiscal measures. That promise of greater fiscal activism coincided with government bond yields moving to record highs last month.
The government will publish preliminary GDP figures for October-December on February 16 at 8:50 a.m. local time (2350 GMT on February 15). The Reuters poll results and the timing of the official release leave markets and policymakers awaiting confirmation of the extent and durability of the reported rebound.
Context and implications
- Investment-led rebound: Corporate capital expenditure is the principal driver of the projected quarterly expansion, reflecting improved business sentiment.
- Consumption remains subdued: Private spending showed only marginal growth as consumer inflation stayed above the BOJ's 2% aim.
- Policy interplay: Recent BOJ rate moves and the governments pledge of proactive fiscal support are key variables that have influenced yields and the economic outlook.
Data note
The median forecast cited in this report comes from a poll of 16 economists. The official preliminary GDP release is scheduled for February 16 at 8:50 a.m. local time (2350 GMT on February 15).