Japan’s Q4 GDP Shows Minimal Growth, Poses Challenge for PM Sanae Takaichi
Tokyo sees just 0.2% annualised growth in Q4 as private consumption and capital spending remain sluggish, raising concerns for new government’s economic agenda
Tokyo, Feb 16: Japan’s economy showed only marginal growth in the fourth quarter, sharply missing market expectations and posing an early challenge for newly elected Prime Minister Sanae Takaichi. Weak domestic demand and persistent cost of living pressures weighed on private consumption and business investment, signaling a fragile recovery.
Government data revealed that gross domestic product (GDP) grew at an annualised rate of 0.2% in Q4, following a revised 2.6% contraction in the previous quarter. The quarterly rise was just 0.1%, below the median market estimate of 0.4%.
Economists noted that sluggish consumption, slow capital expenditure, and flat net exports underlined the lack of strong recovery momentum. “Consumption, capital spending, and exports haven’t picked up as expected, showing the economy’s rebound remains fragile,” said Kazutaka Maeda, economist at Meiji Yasuda Research Institute.
Private consumption, which accounts for over half of Japan’s economic output, expanded 0.1%, down from 0.4% in the previous quarter, reflecting the drag from high food prices. Meanwhile, capital investment rose just 0.2%, slower than the 0.8% projected by market analysts. Net external demand contributed little to growth, although export declines moderated after US tariffs on Japanese goods eased.
Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research, said sustainable growth depends on a positive return in real wages. “This year’s wage negotiations will be critical for the economy’s broader recovery,” he noted.
The data will likely not change the Bank of Japan’s monetary policy trajectory, which remains focused on controlling inflation while gradually normalising ultra-low borrowing costs. Economists expect gradual expansion in the coming months, though structural challenges such as consumption weakness and cautious corporate investment could limit growth.
The report highlights the hurdles facing PM Takaichi as her government seeks to boost investment through targeted public spending in key sectors critical to economic security, even as external pressures and domestic inflation continue to challenge recovery efforts.
