Source: Portal Site of Official Statistics of Japan (e-Stat)
This service uses the API function of the Portal Site of Official Statistics of Japan (e-Stat), but the content of this service is not guaranteed by the government.
This service uses statistical data published by the Bank of Japan, but the content of this service is not guaranteed by the Bank of Japan.
According to the Cabinet Office’s preliminary GDP release (first estimate) on 18 February 2026, real GDP in Q4 2025 rose by +0.1% quarter-on-quarter (annualized +0.2%), returning to positive growth for the first time in three quarters after the prior quarter’s -0.7%. Nominal GDP increased by +0.6% QoQ (annualized +2.3%), outpacing real growth, and the GDP deflator remained at a high level of +3.4% year-on-year. While the pace of growth is very modest, the data confirm a structure in which domestic demand underpins activity, offset in part by simultaneous declines in external demand. With financial normalization progressing, firms’ ability to pass through costs to prices and the pace of real income recovery will be critical to sustaining growth going forward.
The Cabinet Office’s preliminary shows real GDP at +0.1% QoQ in Q4 2025, turning positive after the -0.7% in the previous quarter. Annualized growth is limited to +0.2%, well below potential growth and indicating a very gradual expansion. Looking at the past 12 quarters, an unstable pattern of alternating positive and negative quarters has persisted since Q3 2023, so this latest positive reading does not necessarily signal a return to a sustained recovery path.
Nominal GDP rose by +0.6% QoQ (annualized +2.3%), substantially outpacing real GDP, resulting in a divergence of 0.5 percentage points between nominal and real growth. This gap suggests continued price increases: the GDP deflator stood at +3.4% YoY, down slightly from +3.5% in the prior quarter but still at a high level. Although the GDP deflator has trended down from the +6.2% peak in Q3 2023, it has remained in the +3% range for four consecutive quarters, indicating that upward inflationary pressure has become entrenched.
The real GDP level reached ¥589.7276 trillion, and nominal GDP reached ¥668.9414 trillion, with nominal GDP remaining near historical highs. However, real activity expansion remains very slow in quantity terms.
Decomposing the +0.1% growth by demand components reveals a domestic-demand-led structure on the one hand and notable downward pressure from external demand on the other. Private final consumption rose by +0.1% QoQ and private non-residential investment increased by +0.2% QoQ, both showing modest expansion and supporting domestic demand. Public demand contracted by -0.2% QoQ, marking a second consecutive negative quarter (previous -0.1%), so fiscal support to growth was absent.
On the external side, exports fell by -0.3% QoQ and imports also fell by -0.3% QoQ. In the prior quarter exports had dropped by -1.4% while imports were -0.1%, with the export decline being the main drag. This quarter both exports and imports decreased slightly, leaving net exports (exports minus imports) with virtually zero contribution to growth. Reviewing the past 12 quarters, external demand boosted growth in Q4 2024 (exports +1.7%, imports -1.9%), but external contributions have become unstable since the start of 2025.
Comparing domestic and external contributions, a domestic-demand-led growth pattern has taken hold in 2025. In Q1 2024, export -3.7% and import -3.9% sharply depressed growth to -0.6%, but thereafter modest domestic expansion has tended to underpin growth. That said, the domestic expansion pace is very slow and has not translated into robust growth.
Private final consumption rose by +0.1% QoQ, slowing from +0.4% in the prior quarter, but marking the fifth consecutive quarter of positive growth. Looking back over the last 12 quarters, consumption recorded two consecutive quarters of negative growth in Q2–Q3 2023, but since Q4 2023 it has generally remained in positive territory. Nevertheless, growth rates have been limited to the +0.1%–+0.7% range and have not indicated a strong consumption expansion.
The resilience in consumption is supported by rising nominal wages and a stable employment environment. According to MIC’s Statistics Bureau CPI, the headline CPI in December 2025 was +2.1% YoY, down sharply from +2.9% the previous month. Core CPI (excluding fresh food) was +2.4% and core-core CPI (excluding fresh food and energy) was +2.9%, both outpacing the headline index, suggesting that easing energy prices contributed to the slowdown in the headline CPI. The deceleration in headline inflation can lead to improvements in real income, which in turn supports consumption.
However, persistent uncertainty about the future limits consumption growth. With the GDP deflator at +3.4%, a relatively high level, the pace of real income gains remains slow and consumers’ purchasing power expansion is constrained.
Private non-residential investment turned positive at +0.2% QoQ, after -0.3% in the prior quarter. Over the past 12 quarters, investment showed a strong increase of +2.5% in Q4 2023, followed by a sharp fall of -2.4% in Q1 2024, and has since fluctuated in the -0.2% to +1.3% range. Although investment is volatile, steady demand centered on digitalization and labor-saving investments continues to provide a floor.
BOJ’s Tankan survey indicates the large-manufacturing sector’s business conditions DI for Q4 2025 was +15.0, improving 1 point from +14.0 in the prior quarter and marking the fourth consecutive quarterly improvement. The outlook DI was +12.0, unchanged, reflecting improved sentiment but lingering caution about the outlook. DI for medium-sized manufacturing firms improved to +16.0 from +12.0, and small manufacturing firms rose to +6.0 from +1.0, indicating that sentiment improvements are broad-based across firm sizes.
The DI for large non-manufacturing firms remained high at +34.0, confirming resilience in domestic-demand-oriented sectors, notably services. However, the outlook DI for non-manufacturing was +28.0, 6 points below the current DI, suggesting firms are cautious about future conditions—this caution may be suppressing stronger investment expansion.
Exports fell by -0.3% QoQ for a second consecutive quarter (previous quarter -1.4%). BOJ market data show the USD/JPY monthly averages in Q4 2025 were 151.28 in October, 155.12 in November, and 155.88 in December, reflecting a pronounced yen depreciation and a quarterly average in the low 154 range versus the high 147 range in the prior quarter. Ordinarily, yen weakness would support export volumes, but exports declined despite the weaker yen.
Tankan assumed exchange rates indicate the large-manufacturing sector’s assumed rate in Q4 2025 was 146.48 JPY/USD, implying an approximate 8-yen gap toward yen weakness relative to actual market rates. Even though the yen depreciated more than firms had assumed, exports fell—this suggests structural factors such as slower overseas demand and increased local production abroad are at play.
Imports also declined by -0.3% QoQ, matching the export drop. While the prior quarter saw a small import decline of -0.1%, the reduction widened slightly this quarter. Yen depreciation exerts upward pressure on import prices, but import volumes fell, indicating limited underlying domestic demand strength. Over the past 12 quarters imports have shown large swings (e.g., -3.6% in Q2 2023, -3.9% in Q1 2024), making the current -0.3% a relatively modest decline.
BOJ’s Tankan survey for Q4 2025 shows the large-manufacturing business conditions DI at +15.0, up 3 points from +12.0 in Q1 2025 and marking four consecutive quarters of improvement. Medium-sized manufacturing DI was +16.0 and small manufacturing DI was +6.0, showing that sentiment improvement has broadened across firm sizes. Notably, the DI for small manufacturing firms rose substantially by 5 points from +1.0 in the prior quarter.
The DI for large non-manufacturing firms remains high at +34.0, underlining resilience in service-sector and other domestic-demand-oriented industries. However, the outlook DI for non-manufacturing sits at +28.0, 6 points below the current reading, indicating caution about future conditions. The manufacturing outlook DI is +12.0, 3 points below the current +15.0, reflecting persistent wariness despite improving conditions.
On the exchange-rate front, BOJ market data show the USD/JPY monthly averages in Q4 2025 were 151.28 (Oct), 155.12 (Nov), and 155.88 (Dec), reflecting yen depreciation. The large-manufacturing sector’s assumed rate in the Tankan was 146.48 JPY/USD, and the all-size all-industry assumed rate was 147.06 JPY/USD, indicating firms were generally surprised by the extent of yen weakness.
Looking at effective exchange rates (2020=100), the nominal effective exchange rate declined to 73.1 in October, 71.6 in November, and 70.7 in December, implying a continued drop in the yen’s overall purchasing power. The real effective exchange rate also fell to 75.9 (Oct), 69.4 (Nov), and 68.8 (Dec), confirming yen weakness even after price adjustments.
Against a backdrop of improving corporate sentiment and yen depreciation, the fact that exports fell by -0.3% QoQ suggests that exchange-rate movements have a smaller effect on export volumes than before. The expansion of local production overseas and increased local sourcing may have reduced exporters’ sensitivity to exchange-rate fluctuations.
BOJ’s unsecured overnight call rate (O/N) monthly average was around 0.477–0.478% through November 2025, rose to 0.557% in December, and further climbed to 0.728% in January 2026. February 2026 remained at 0.728%, confirming that the BOJ has accelerated the pace of financial normalization.
Monetary base month-end balances declined from ¥649.9 trillion in February 2025 to ¥589.4 trillion in January 2026, a reduction of over ¥60 trillion and a year-on-year decline of -9.5%. Since September 2025 the year-on-year declines widened to -6.2%, -7.8%, -8.5%, -9.8%, and -9.5%, indicating the BOJ is steadily implementing quantitative tightening.
Progress in financial normalization may raise corporate funding costs and affect investment. Nevertheless, the unsecured call rate remains in the 0.7% range—low by historical standards—and the limited impact so far is suggested by private non-residential investment still expanding modestly at +0.2% QoQ.
BOJ’s Corporate Goods Price Index (CGPI, 2020=100) rose from 125.5 in January 2025 to 128.4 in January 2026, continuing an upward trend. The YoY change in January 2026 was +2.3%, indicating persistent upstream price pressures.
MIC’s CPI shows the headline index in December 2025 at +2.1% YoY, down sharply from +2.9% the month prior. Core CPI (excluding fresh food) was +2.4% and core-core CPI (excluding fresh food and energy) was +2.9%, both outpacing the headline. The moderation in the headline CPI is attributable to easing energy prices, but underlying inflationary pressures remain strong.
Comparing CGPI (upstream) and CPI (downstream) indicates that upstream price increases are being transmitted downstream. Notably, core-core CPI at +2.9% exceeds the CGPI YoY of +2.3%, suggesting downstream price pass-through is occurring at a pace that outstrips upstream increases. This implies firms’ ability to pass costs through to consumer prices has improved, and a wage-driven sustained inflation mechanism may be taking hold.
The GDP deflator’s high YoY increase of +3.4% indicates broad-based price pressures across the economy. Compared with core-core CPI at +2.9%, the higher GDP deflator suggests that price rises outside consumer goods—such as investment goods and tradeable goods prices—are contributing to overall inflation.
BOJ market data show the USD/JPY monthly average moved from 151.96 in February 2025 to 156.71 in January 2026, reflecting continued yen depreciation. Both nominal and real effective exchange rates have trended downward, indicating a persistent decline in the yen’s comprehensive purchasing power.
Yen depreciation raises import prices and thus contributes to domestic inflation. The continued rise in CGPI suggests that increased import costs have been reflected in upstream prices. However, as noted, exports fell by -0.3% QoQ despite yen weakness, demonstrating that exchange-rate movements now have more complex effects on the real economy.
MIC’s CPI details show the headline index in December 2025 at +2.1% YoY, core CPI at +2.4%, and core-core CPI at +2.9%. The difference between headline and core CPI is 0.3 percentage points, indicating a limited effect from fresh-food price movements. The difference between core CPI and core-core CPI is 0.5 percentage points, showing that energy prices have been a factor in pulling down the headline rate.
Historically, from April to June 2025 headline and core CPI both recorded high growth of +3.3%–+3.6%, but from July onward the headline has decelerated. Core-core CPI peaked at +3.4% in July 2025 and has gradually eased, but remained high at +2.9% in December—well above the BOJ’s 2% price-stability target.
This divergence pattern indicates that while easing energy prices have moderated headline inflation, underlying inflationary pressure remains strong. The elevated core-core CPI at +2.9% suggests widespread increases in service prices and broad-based corporate price pass-through backed by rising wages.
The GDP deflator at +3.4% YoY exceeds the core-core CPI growth of +2.9% by 0.5 percentage points. Since the GDP deflator captures economy-wide price changes including investment goods and external trade prices in addition to consumer prices, this suggests price rises outside consumer goods are contributing to overall inflation.
Over the past 12 quarters the GDP deflator peaked at +6.2% in Q3 2023 and has since trended down, but has remained in the +3.0%–+3.6% range since Q4 2024. The high plateau in inflation confirms that escape from deflation has become established.
METI’s Industrial Production Index (seasonally adjusted) was 101.0 in December 2025, a small monthly decline of -0.3%. January 2026 fell to 99.9 (-1.1% MoM), then rose to 102.2 in February (+2.3% MoM), showing large month-to-month swings. Looking back 12 months, the index has been nearly flat from 101.4 in March 2024 to 102.2 in February 2026, indicating a very slow pace of production expansion.
The unstable movement in production suggests firms are frequently adjusting output. While investment expanded modestly at +0.2% QoQ, production has remained in a flat range, reflecting firms’ cautious stance toward demand prospects.
The Cabinet Office’s CI shows the leading index at 110.2 in December 2025, up from 109.9 the previous month. The coincident index fell to 114.5 from 114.9, and the lagging index fell to 110.8 from 112.9. A rising leading index alongside a falling coincident index points to uncertainty about the near-term outlook.
Over the past 12 months the leading index has trended up from a trough of 104.5 in April 2025 to 110.2 in December, while the coincident index has trended down from a peak of 117.0 in February 2025 to 114.5 in December. The recovery in the leading index suggests some improvement in near-term prospects, but the fall in the coincident index indicates current conditions remain stalled.
Examining real GDP growth over the past 12 quarters shows a trough of -1.4% in Q3 2023, after which growth has alternated between positive and negative quarters. Following a renewed contraction of -0.6% in Q1 2024, the economy posted +0.2% (Q2), +0.7% (Q3), and +0.5% (Q4) in 2024 for three consecutive positive quarters, but returned to -0.7% in Q3 2025 and only +0.1% in Q4 2025.
This volatile pattern suggests the Japanese economy has not established a structural growth trajectory. Quarter-to-quarter swings are large and a persistent expansion pace has not taken hold. At the same time, the economy has repeatedly moved back into positive growth after negative quarters, so this does not reflect a deep recession.
By component, private final consumption has largely remained positive since Q4 2023, confirming domestic demand’s resilience. Private non-residential investment—though volatile—has been recovering from the -2.4% trough in Q1 2024. Exports recovered after the -3.7% trough in Q1 2024 but have shown renewed weakness with -1.4% in Q3 2025 and -0.3% in Q4 2025, making external demand instability a drag on overall growth.
Comparing nominal GDP and the GDP deflator shows nominal growth exceeding real growth amid rising prices. While the GDP deflator has eased from the +6.2% peak in Q3 2023, it has remained in the +3% range, indicating entrenched inflation. The combination of muted real growth and relatively strong nominal growth indicates that price increases have been the main driver of nominal expansion.
TOPIX quarter-end closing values show a sharp rise to 3408.97 at the end of Q4 2025, up +8.6% from 3137.6 at the prior quarter-end. Over the past 12 quarters TOPIX has risen about 70% from 2003.5 at the end of Q1 2023 to 3408.97 at the end of Q4 2025, indicating a robust equity market.
Comparing real GDP growth and TOPIX reveals that their co-movement is not strong. In Q3 2025 real GDP fell -0.7% QoQ while TOPIX rose +10.0% QoQ. In Q4 2025 real GDP rose only +0.1% QoQ, yet TOPIX advanced another +8.6%.
This divergence suggests the equity market prices in future growth expectations rather than the current real-economy status. Expectations for improved corporate earnings, stronger financial-system health amid normalization, and potential benefits to exporters from yen weakness are likely supporting higher equity valuations.
Looking at market reactions around the GDP release, TOPIX rose +1.21% on 18 February 2026 (publication day) and +1.18% on 19 February. That equity prices rose despite a +0.1% GDP print roughly in line with consensus suggests the market viewed the report as confirming the economy’s resilience.
The Q4 2025 preliminary GDP suggests Japan is maintaining modest growth but has not achieved a strong expansion. Looking ahead, upside and downside risks appear roughly balanced.
First, continued improvement in corporate sentiment. BOJ’s Tankan shows the large-manufacturing business conditions DI has improved for four consecutive quarters, and this improvement is broadening to medium and small firms. Better corporate sentiment could translate into higher investment.
Second, real-income improvements could support consumption. The slowdown in headline CPI to +2.1% in December 2025 could accelerate real-income gains. If wage growth continues while inflation moderates, consumer purchasing power may rise.
Third, yen depreciation can enhance corporate profits. Actual exchange rates have weakened beyond firms’ assumed rates, which could improve exporters’ earnings. However, as noted, export volumes have not shown a clear response to yen weakness, so this effect may be limited.
First, financial normalization could raise corporate funding costs. The unsecured call rate rose to 0.728% in January 2026, signaling an accelerated pace of BOJ rate increases. Tighter financial conditions could curb investment.
Second, instability in external demand could restrain growth. Exports have fallen for two consecutive quarters, suggesting slower overseas demand and structural erosion in export competitiveness. If the weak response of exports to yen depreciation persists, external-demand-led growth will be unlikely.
Third, high inflation could suppress consumption. With the GDP deflator at +3.4% and real income gains limited, if price growth outpaces wage increases, real incomes may fall and consumer spending could be dampened.
Japan faces structural constraints such as a low potential growth rate. The average real GDP growth over the past 12 quarters translates to roughly a 1% annualized rate, short of a sustained recovery path. Demographic decline, slower productivity gains, and insufficient innovation are forming a structural ceiling on growth.
As financial normalization advances, a shift away from the ultra-low interest-rate environment is required. Firms must make investment decisions under higher interest-rate assumptions, and households must consider asset allocation in a higher-rate world. How smoothly this structural transition occurs will be a key determinant of growth sustainability.
GDP deflator: The ratio of nominal GDP to real GDP, reflecting the overall price level in the economy. Whereas the Consumer Price Index (CPI) captures price changes for household purchases, the GDP deflator reflects price changes across the entire economy, including investment goods and exported/imported goods.
Core CPI: Consumer Price Index excluding fresh food. By removing volatile fresh-food prices, core CPI more clearly captures underlying consumer price trends. The BOJ uses this as one of its primary indicators when assessing its 2% price-stability target.
Core-core CPI: Consumer Price Index excluding fresh food and energy. By removing energy-price volatility as well, core-core CPI aims to capture persistent inflationary pressure driven by factors such as wage increases and sustained price pass-through.
CI (Composite Index): An index that measures the size and tempo of business-cycle movements. It comprises a leading index (which moves ahead of the economy), a coincident index (which moves with the economy), and a lagging index (which moves after the economy). The Cabinet Office publishes this monthly.
Business Conditions DI: An index from the BOJ’s Tankan survey indicating firms’ business sentiment. Calculated as the percentage of respondents reporting 'favorable' conditions minus the percentage reporting 'unfavorable' conditions; higher positive values indicate better sentiment.
Corporate Goods Price Index (CGPI): An index measuring price changes for goods traded between firms, capturing upstream price dynamics. The BOJ publishes this monthly and it is used to analyze how upstream price movements may transmit to consumer prices.
Effective exchange rate: A trade-weighted index of a currency against multiple currencies. The nominal effective exchange rate is based on exchange rates alone; the real effective exchange rate adjusts for price-level differences and reflects purchasing-power changes. It is used to assess overall currency strength.
Monetary base: The total supply of currency provided by the central bank, consisting of currency in circulation (banknotes and coins) and current account deposits held by private financial institutions at the central bank. It is an indicator of the quantitative stance of monetary policy.
Unsecured call rate (O/N): The interest rate on unsecured overnight interbank loans. It is a representative short-term rate used by the central bank as an operating target for monetary policy.
Industrial Production Index: An index measuring the level of production activity in the industrial sector, mainly manufacturing. Published monthly by METI, the seasonally adjusted index is widely used to assess business-cycle developments.
This column was automatically generated by AI integrating Cabinet Office GDP data, Bank of Japan statistics, e-Stat public statistics, and market data as a macroeconomic analysis resource. This is not a recommendation to invest in any specific security. Please make investment decisions at your own responsibility and consult professionals as needed.