Japan narrowly avoids technical recession, but GDP misses forecasts

(Sharecast News) - The Japanese economy grew less than expected in the last three months of the year, according to official data published on Monday, narrowly avoiding a technical recession and increasing pressure on new Prime Minister Sanae Takaichi's government to provide fiscal stimulus.

GDP expanded by just 0.1% in the fourth quarter, well short of forecasts for growth of 0.4%. The growth followed a 0.7% contraction - revised downwards from an earlier reading of -0.6% - in the previous three months.

The meagre growth was driven by private consumption and private residential and corporate investments, according to cabinet office data, while exports and public spending were weak. For 2025 as a whole, Japan's economy grew 1.1%, after a 0.2% contraction in 2024.

Japan's economy has also been hit by US President Donald Trump's trade war, which increased tariffs on Japanese exports to America.

The diplomatic row between Beijing and Tokyo over the security of Taiwan also weighed, with Chinese tourism to Japan almost halving.

Takaichi became Japan's first woman prime minister in October and called snap elections for February 8 which saw her Liberal Democratic Party (LDP) win a historic and crushing two-thirds majority in the lower house, or Diet.

Her government in November pushed through a 21.3 trillion yen stimulus package aimed at boosting growth, including energy subsidies and investment incentives in sectors such as semiconductors and artificial intelligence.

Reporting by Frank Prenesti for Sharecast.com