Japan upgrades Q4 GDP on robust capex, Iran war clouds outlook
Domestic demand contributes 0.3 of a percentage point to fourth-quarter GDP, revised up from zero
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[TOKYO] Japan’s economy grew faster than initially estimated in the final three months of 2025, thanks to rapid business investment, revised data showed on Tuesday (Mar 10), although the Middle East conflict casts a shadow over the growth outlook.
Gross domestic product (GDP) rose 1.3 per cent, quicker than the paltry 0.2 per cent preliminary estimate and slightly overshooting economists’ median forecast for a 1.2 per cent growth.
On a quarter-on-quarter basis without annualisation, GDP grew 0.3 per cent, matching the median forecast for a 0.3 per cent expansion and compared with the initial estimate of a 0.1 per cent rise.
Businesses’ capital expenditure rose 1.3 per cent in the fourth quarter, the biggest growth since Q4 2023. It was revised up from the initial estimate for a 0.2 per cent rise and beat the economists’ forecast for a 1.1 per cent uptick.
Private consumption, which accounts for more than half of Japan’s economy, increased 0.3 per cent, also upgraded from a 0.1 per cent uptick in the preliminary data.
“The double upward revisions made it clearer that Japan’s domestic demand-led economic growth is continuing,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
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Domestic demand contributed 0.3 of a percentage point to fourth-quarter GDP, revised up from zero. External demand, or exports minus imports, was unchanged from the preliminary data of no contribution.
Other data released on Tuesday showed Japan’s household spending unexpectedly fell 1 per cent in January from a year earlier, boding ill for private consumption.
“Japan should continue to see growth through January-to-March quarter, but after April, if energy imports remain disrupted due to the Iran conflict, higher prices could hit consumption and companies may also pull back on capital investment,” Minami said.
To cushion the economic blow from rising fuel costs caused by the Iran conflict, Japan will consider steps to curb petrol prices, Prime Minister Sanae Takaichi said on Monday.
The Bank of Japan has not shifted its tone on raising interest rates if the economy grows in line with its outlook, although governor Kazuo Ueda has said the potential hit to global growth from the Middle East conflict requires vigilance.
Japan’s fourth-quarter growth followed a 2.6 per cent contraction in the third quarter and a 2.4 per cent expansion in the second.
The size of the country’s nominal GDP was 663.8 trillion yen (S$5.4 trillion) last year after the revision, while India, seen close to overtaking Japan as the world’s fourth-largest economy, was yet to cross the US$4 trillion mark. REUTERS
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