Source: Portal Site of Official Statistics of Japan (e-Stat)
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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.
The Cabinet Office's second preliminary release for Q4 2025 GDP (published March 9, 2026) shows real GDP growth of q/q +0.3% (annualized +1.3%), reversing from q/q -0.7% in the prior quarter and returning to positive territory for the first time in three quarters. Nominal GDP grew +0.9% (annualized +3.5%), and the GDP deflator remained elevated at y/y +3.4%. The main growth driver was private non-residential investment (capex) at +1.3%, while private consumption kept a firm footing at +0.3%. External demand was neutral for growth as both exports and imports contracted by -0.3%. With the BOJ advancing financial normalization, the economy is entering a phase where the autonomous resilience of domestic demand will be tested.
According to the Cabinet Office preliminary figures, Q4 2025 real GDP grew q/q +0.3% (annualized +1.3%), marking a turnaround from q/q -0.7% (annualized -2.6%) in the prior quarter and returning to positive growth after three quarters. However, the pace of growth is modest compared with +0.7% (q/q) in 2024 Q3 and +0.5% in 2024 Q4, and remains below the +0.6% registered in 2025 Q2. On an annualized basis, +1.3% only slightly exceeds Japan's estimated potential growth rate (around 0.5–1.0%).
Nominal GDP grew +0.9% (annualized +3.5%), substantially outpacing real growth and maintaining a state of nominal-real divergence. The GDP deflator was y/y +3.4%, a slight decline from +3.5% in the previous quarter but still at a high level, indicating that price pressures are permeating the economy. Real GDP amounted to ¥591,856.7 billion, and nominal GDP to ¥671,554.9 billion, with nominal GDP remaining near historical highs.
Looking at the past 12 quarters, growth has followed an unstable pattern—alternating between positive and negative—bottoming at -1.4% in 2023 Q3. Despite episodes of negative growth in 2024 Q1 (-0.5%) and 2025 Q3 (-0.7%), the trend can be characterized as a gentle expansion. Nevertheless, the large amplitude of quarter-to-quarter swings suggests cyclical volatility is currently larger than structural growth.
Decomposing growth by demand components highlights a domestic demand-led recovery. Private non-residential investment accelerated to q/q +1.3% from 0.0% in the prior quarter and was the principal driver of growth. Private final consumption expenditure also remained positive at +0.3% (down from +0.5% in the previous quarter). Government demand improved slightly to +0.2% (from -0.1%), providing additional support to domestic demand.
External demand contracted with both exports and imports at q/q -0.3%, rendering the net contribution of external demand broadly neutral. In the prior quarter exports fell -1.4% and imports -0.1%, which had weighed on growth; this quarter the symmetric contraction of exports and imports offset each other. Over the past 12 quarters, external demand has shown large swings—exports -3.7% and imports -3.9% in 2024 Q1 being a notable slump—and the contribution from external demand remains unstable.
From the balance between domestic and external demand, Japan appears to be in a transition away from external dependence toward domestic-led dynamics. However, export weakness may reflect global demand slowdown and adjustments in the yen, so external developments merit continued monitoring.
Business investment rose q/q +1.3%, accelerating from 0.0% in the previous quarter and +1.2% the quarter before, marking a strong increase not seen since +0.8% in 2024 Q3. Over the past 12 quarters, investment plunged -2.2% in 2024 Q1, then recovered (+1.0% in 2024 Q2, +0.8% in 2024 Q3), fell -0.5% in 2024 Q4, and now rebounded to +1.3%—interpretable as a correction from the temporary slump.
Machinery orders (Cabinet Office, private excluding ships & power) support this capex upswing: month-over-month increases of +7.0% in October 2025 and +19.1% in December 2025 underline the expansion in investment orders. November's -11.0% drop, however, underscores large monthly volatility. The BOJ Tankan (Q4 2025) shows large-manufacturing DI at 15.0 (expected 12.0) and large non-manufacturing DI at 34.0 (expected 28.0), indicating robust sentiment across manufacturing and non-manufacturing firms and confirming firm investment appetite.
Private final consumption grew q/q +0.3%, down from +0.5% in the prior quarter but marking a fourth consecutive quarter of positive growth. Having escaped stagnation in 2024 Q4 (0.0%) and 2024 Q2 (0.0%), a modest expansion trend has taken hold in 2025. While consumption suffered double-digit declines in 2023 Q2 and Q3, it has since largely remained in positive territory.
Retail Trade Survey (METI) indicates retail sales of ¥16,097.0 billion in December 2024 (y/y +3.5%) and ¥12,728.0 billion in January 2025 (y/y +4.4%), consistent with the resilience in GDP consumption. On a real basis, however, gains may be muted by inflation. The Consumer Price Index (MIC Statistics Bureau) shows core CPI (excluding fresh food) around y/y +3.0% for Oct–Dec 2025, suggesting limited real purchasing power growth.
Exports fell q/q -0.3%, a much smaller decline than the prior quarter's -1.4%. Imports also declined q/q -0.3% (vs. -0.1% prior), and with both contracting at the same rate the net contribution of external demand was near zero. Looking back 12 quarters, exports were volatile—-3.7% in 2024 Q1 followed by +0.5%, +2.2%, +1.7%—then -0.2% (2025 Q1), +1.9% (Q2), -1.4% (Q3), and -0.3% (Q4), underscoring persistent instability.
Trade statistics (Ministry of Finance) show monthly averages for Oct–Dec 2025 of exports ¥9,894.7 billion and imports ¥9,897.2 billion, nearly balanced. Monthly trade balances were -¥232.1 billion (Oct), +¥311.1 billion (Nov), and +¥113.5 billion (Dec), yielding a small quarterly surplus. Export weakness may reflect global demand slowdown and adjustments in the yen. BOJ exchange-rate data show USD/JPY monthly averages of 151.28 (Oct), 155.12 (Nov), and 155.88 (Dec) in a weakening-yen direction, which would normally aid exporters, but limited export volume growth suggests other factors are constraining shipments.
BOJ Tankan (Q4 2025) reports the large-manufacturing business conditions DI at 15.0 (up 1 point from 14.0 in Q3; outlook 12.0). Large non-manufacturing DI stands at 34.0 (unchanged; outlook 28.0). Sentiment among mid-sized and small manufacturers improved—mid-sized manufacturing DI 16.0 (from 12.0), small manufacturing DI 6.0 (from 1.0)—indicating across-the-board manufacturing mindset improvement.
Over the past four quarters, large-manufacturing DI trended upward from 12.0 (Q1 2025) to 15.0 (Q4 2025), while the outlook remained steady at 12.0—firms are satisfied with current conditions but cautious about prospects. Large non-manufacturing is stable at a high level (34.0–35.0), reflecting domestic demand resilience.
Assumed exchange rates in the BOJ Tankan averaged 147.06 yen for all sizes and industries and 146.48 yen for large manufacturers in Q4 2025. Actual market rates (BOJ) averaged 151.28 (Oct), 155.12 (Nov), and 155.88 (Dec), substantially weaker than firms' assumptions. This gap provides additional profit opportunities for exporters but raises import costs, contributing to upward price pressure.
The nominal effective exchange rate (BOJ, 2020=100) fell—nominal: 73.1 (Oct), 71.6 (Nov), 70.7 (Dec); real effective: 70.5, 69.4, 68.3 over the same months—implying improved relative competitiveness. Nevertheless, exports contracted q/q -0.3% in the GDP data, suggesting non-exchange-rate factors (weak global demand, etc.) are constraining exports.
The uncollateralized overnight call rate (BOJ, daily averages) was 0.477–0.478% through Nov 2025, rose to 0.557% in Dec 2025, and further to 0.728% from Jan 2026 onward. This reflects the BOJ's additional rate increase in Dec 2025 and indicates a step in policy rate normalization. The 0.728% level from Jan 2026 represents roughly a 25 bps increase versus ~0.477% in early 2025, evidencing steady progress toward normalization.
The monetary base (BOJ, end-of-month balances) contracted from ¥645.9 trillion in Mar 2025 to ¥580.9 trillion in Feb 2026—a decrease of about ¥65 trillion and a y/y decline of -10.6%. Over the past 12 months, the y/y decline widened from -3.1% (Mar 2025) to -10.6% (Feb 2026), confirming continued quantitative tightening by the BOJ. The reduction reflects lower JGB purchases and natural declines from maturities, signaling an ongoing normalization process.
The Corporate Goods Price Index (BOJ, CGPI, 2020=100) rose gently from 125.8 in Feb 2025 to 128.4 in Jan 2026, indicating persistent upstream price pressures. No y/y series was provided here, so the acceleration/deceleration pace cannot be judged precisely. CGPI is roughly 28% above 2020 levels, reflecting rises in energy and commodity costs pushing up producer-stage prices.
Comparing CGPI (128.4, Jan 2026) and CPI core (112.9, Jan 2026, 2020=100) suggests upstream inflation has not been fully passed through to consumer prices. Nevertheless, core CPI y/y +2.0% has reached the BOJ's price-stability target, implying gradual progress in price pass-through.
FX market (BOJ, USD/JPY monthly averages) moved from 149.18 (Mar 2025) to 151.28 (Oct), 155.12 (Nov), 155.88 (Dec), 156.71 (Jan 2026) and then slightly back to 155.07 (Feb). The yen's weakening likely reflects widening Japan-U.S. rate differentials and shifts in global risk appetite. Yen weakness benefits exporters' profitability but raises import prices and domestic inflation.
Across three CPI measures (MIC Statistics Bureau), headline CPI y/y moved from +3.0% (Oct 2025) → +2.9% (Nov) → +2.1% (Dec) → +1.5% (Jan 2026), showing a pronounced easing trend. Core CPI (ex-fresh food) declined from +3.0% → +3.0% → +2.4% → +2.0%. Core‑core CPI (ex-food & energy) edged down from +3.1% → +3.0% → +2.9% → +2.6%.
From these divergences: first, headline CPI's faster deceleration suggests energy-price pressures have weakened. Second, core CPI reached +2.0% in Jan 2026—the BOJ's 2% objective—indicating inflation excluding fresh food is stabilizing at target. Third, core‑core CPI remains relatively elevated at +2.6%, signaling persistent underlying price pressures beyond food and energy.
By contrast, the GDP deflator (Cabinet Office) was y/y +3.4% in Q4 2025 (slightly down from +3.5% prior) and remains high. Over the last 12 quarters the GDP deflator has trended down from a peak of +6.2% in 2023 Q3, but since 2024 Q1 has mostly stayed in a +3.0–3.6% range. The GDP deflator exceeding headline CPI (January 2026 +1.5%) may reflect movements in export/import deflators and price components in GDP such as imputed rents.
The Industrial Production Index (METI, sa, 2020=100) shows large month-to-month swings: 103.0 (Oct 2024), 101.3 (Nov), 101.0 (Dec), 99.9 (Jan 2025), 102.2 (Feb 2025), indicating no clear trend. The Feb 2025 level of 102.2 is below Oct 2024's 103.0, suggesting production is broadly flat. With real GDP expanding modestly (+0.3%), the lack of a clear production upswing implies services/non-manufacturing may be driving growth.
The Coincident Index (Cabinet Office) moved 114.8 (Nov 2025), 114.3 (Dec), 116.8 (Jan 2026). After peaking at 117.1 in Feb 2025 and drifting down, the index turned higher in Jan 2026. The Leading Index rose 109.6 (Nov), 110.3 (Dec), 112.4 (Jan), pointing to brighter near-term prospects. The Lagging Index fell 112.6 (Nov), 111.1 (Dec), 110.3 (Jan), reflecting delayed adjustment. Together, the coincident and leading index movements indicate a modest expansion phase.
Ministry of Finance trade statistics show exports for Oct–Dec 2025 at ¥9,766.2 billion, ¥9,709.5 billion, ¥10,408.3 billion, averaging ¥9,894.7 billion for the quarter—about a 9.1% increase from the prior quarter average (¥9,066.2 billion for Jul–Sep). Yet GDP statistics report exports q/q -0.3%. This divergence between nominal trade values and real GDP export quantities can be explained by several factors.
First, trade statistics are nominal and price increases (including yen depreciation effects) can raise export values even if volumes fall. With the effective exchange rate declining (yen weakening), yen-denominated export values may rise while real export volumes shrink. Second, trade statistics cover goods only, while GDP exports include services; a fall in services exports could depress GDP export growth. Third, differences in seasonal adjustment and compilation methodologies between the statistics can generate discrepancies.
For imports, trade statistics show a quarterly average of ¥9,897.2 billion (Oct–Dec), up from ¥9,271.4 billion in the prior quarter (a ~6.7% increase), whereas GDP imports are reported q/q -0.3%. The same nominal-versus-real and price-effect explanations likely account for the mismatch, with import price increases (driven by yen weakness) inflating nominal import values.
METI retail sales were ¥13,815.0 billion (Oct 2025), ¥14,222.0 billion (Nov), ¥16,097.0 billion (Dec), with y/y growth of +1.3%, +2.8%, +3.5%, and January 2025 at ¥12,728.0 billion (y/y +4.4%). These nominal retail gains are robust, while GDP private consumption rose only q/q +0.3%, a relatively modest increase.
Explanations include: retail sales are nominal and thus boosted by inflation; real consumption growth will be smaller once prices are accounted for. GDP private consumption also includes services; even if goods consumption (retail) is strong, weak services consumption can moderate overall growth. Additionally, retail y/y comparisons and GDP q/q comparisons use different bases, complicating direct comparison.
Machinery orders (Cabinet Office, private excluding ships & power) for Oct–Dec 2025 were ¥992.9 billion, ¥883.9 billion, and ¥1,052.5 billion, with significant increases in October and December. The December m/m +19.1% surge is notable and aligns with GDP capex growth of q/q +1.3%.
Machinery orders typically lead capex by 2–3 quarters. The Oct–Dec orders expansion suggests continued capex growth into 2026 Q1 and beyond. Nevertheless, monthly volatility (November -11.0%) warrants caution. Quarterly averages rose from ¥905.3 billion (Jul–Sep) to ¥976.4 billion (Oct–Dec), roughly +7.9%, exceeding GDP capex's +1.3% q/q growth.
Reviewing the last 12 quarters: 2023 Q1 +0.8%, Q2 +0.2%, Q3 -1.4%, Q4 +0.5%; 2024 Q1 -0.5%, Q2 +0.2%, Q3 +0.7%, Q4 +0.5%; 2025 Q1 +0.3%, Q2 +0.6%, Q3 -0.7%, Q4 +0.3%—the path is characterized by alternating signs and sizeable volatility.
A four-quarter moving average yields 0.0% (2023 Q4), +0.2% (2024 Q4), and +0.1% (2025 Q4), confirming only very gradual trend growth. The unstable pattern suggests cyclical fluctuations dominate while structural growth remains weak.
By component, private consumption has moved from 0.0% (2024 Q4) to +0.7%, +0.2%, +0.5%, +0.3%—a gentle upward trend. Investment has exhibited larger swings (-2.2% → +1.0% → +0.8% → -0.5% → +0.5% → +1.2% → 0.0% → +1.3%), but the trend is upward. Exports are highly unstable (-3.7% → +0.5% → +2.2% → +1.7% → -0.2% → +1.9% → -1.4% → -0.3%), underscoring external demand uncertainty.
The GDP deflator eased from the +6.2% peak in 2023 Q3 to a range of roughly +3.0–3.6% since 2024 Q1, and it stood at +3.4% in Q4 2025—maintaining a high level that suggests a transition toward sustained inflation possibly accompanied by wage gains.
TOPIX quarter-end closing levels were 2768.62 (2024 Q1, +17.0% q/q), 2809.63 (Q2, +1.5%), 2645.94 (Q3, -5.8%), 2784.92 (Q4, +5.3%), 2658.73 (2025 Q1, -4.5%), 2852.84 (Q2, +7.3%), 3137.60 (Q3, +10.0%), 3408.97 (Q4, +8.6%), and 3575.84 (2026 Q1, +4.9%).
TOPIX has risen for four consecutive quarters since 2025 Q2, accumulating roughly a 34% gain. The rally likely reflects improved earnings expectations and the view that BOJ normalization will be positive for corporate profits. By contrast, real GDP growth has been unstable (+0.6% Q2 2025, -0.7% Q3, +0.3% Q4), and no clear correlation between TOPIX and GDP growth is evident.
Around the GDP publication (March 9, 2026), TOPIX fell from 3898.42 (Mar 2) to 3575.84 (Mar 9), a drop of about 8.3%, with notable declines on Mar 3 (-3.24%), Mar 4 (-3.67%), and Mar 9 (-3.80%). These moves suggest market reactions driven by external shocks (global market volatility, policy concerns) rather than the GDP release itself. Because GDP matched expectations (+0.3%), market reaction was limited with respect to the release.
The divergence between equity markets and GDP stems from equities being a forward-looking indicator of corporate profits and exposed to foreign investor flows and FX swings, while GDP is a lagging, aggregated measure of past economic activity.
Q4 2025 GDP points to a mild domestic-led recovery, but upside and downside risks remain.
Upside factors
Firms' investment appetite remains at healthy levels. BOJ Tankan DIs for manufacturing and non-manufacturing show improvement, and machinery orders expanded in Oct–Dec 2025. If corporate investment sentiment persists despite policy normalization, capex-led growth could continue.
Inflation accompanied by wage gains could become entrenched. Core‑core CPI at +2.6% indicates strong underlying price pressure. If price pass-through leads to wage increases and real incomes rise, consumption could expand sustainably.
Leading indicators are improving. The Cabinet Office Leading Index rose to 112.4 (Jan 2026) from 109.6 (Nov 2025), suggesting continued expansion in the coming months.
Downside factors
External demand uncertainty is elevated. Exports have shown consecutive quarters of weak or small declines, and global slowdown or geopolitical risks could further suppress external demand. The fact that exports have failed to expand despite yen weakness implies demand-side constraints beyond price competitiveness.
The effects of financial normalization may materialize. The uncollateralized call rate rose to 0.728% from Jan 2026 and the monetary base contracted y/y -10.6%, raising funding costs and tightening financial conditions—risks that could curb capex and consumption.
Inflation could erode real incomes. With the GDP deflator at +3.4%, if nominal wages do not keep pace, real purchasing power could fall and suppress consumption.
Production activity remains flat. Industrial production lacks a clear uptrend, which could limit manufacturing's contribution to growth.
Structural challenges
Over the medium to long term, several structural issues require attention. First is low potential growth: Japan's potential is estimated at roughly 0.5–1.0%, and the current +0.3% quarterly growth is only close to that range. With population decline and aging, labor input gains are limited and productivity improvement is essential for higher trend growth.
Second, reliance on external demand has not been fully overcome. Export volatility remains high; achieving sustained domestic-led growth requires stronger and more balanced expansion in both consumption and investment.
Third, a durable wage‑price virtuous cycle is not yet established. Although core CPI has hit +2.0%, unless real wages rise substantially, sustained consumption growth will be hard to secure. Converting improved corporate profits into wages and then into broader consumption is a key policy and business challenge.
The Q4 2025 Cabinet Office second preliminary GDP release recorded real GDP q/q +0.3%, marking a return to positive growth after three quarters. The recovery is domestic-demand led: capex rose q/q +1.3%, and consumption remained firm at +0.3%. External demand was neutral as exports and imports both fell q/q -0.3%. As the BOJ pursues policy normalization, the uncollateralized call rate reached 0.728% and the monetary base contracted y/y -10.6%. CPI measures are decelerating (headline +1.5%, core +2.0%, core‑core +2.6% as of Jan 2026), while the GDP deflator remains elevated at +3.4%. Corporate sentiment is healthy and machinery orders have increased, supporting a degree of autonomous domestic recovery. Nonetheless, downside risks from external demand uncertainty, financial tightening, and sluggish real income growth warrant close monitoring. Going forward, securing sustained domestic-led growth hinged on wage gains accompanying inflation and the establishment of a wage-price virtuous cycle remains the central challenge.
GDP deflator: The price index obtained by dividing nominal GDP by real GDP. It reflects economy-wide price movements and, unlike CPI, captures domestic production prices after excluding import price effects.
Core CPI: Consumer Price Index excluding fresh food. The BOJ uses core CPI as a key underlying inflation measure when assessing achievement of its 2% price-stability target.
Core-core CPI: Consumer Price Index excluding fresh food and energy. It indicates underlying inflation trends removing volatile energy-price influences.
Coincident and Leading Indexes (CI): Indexes that indicate the timing and magnitude of business-cycle movements. They include leading, coincident, and lagging components and are used to assess current conditions and near-term outlooks.
Effective exchange rate: A weighted average exchange-rate index against multiple trading-partner currencies using trade weights. There are nominal and real versions; the real effective rate adjusts for price changes and indicates international competitiveness.
Monetary base: The total amount of currency provided by the central bank. It equals banknotes and coins in circulation plus BOJ current account balances and indicates the quantitative stance of monetary policy.
Corporate Goods Price Index (CGPI): An index tracking prices of goods traded between companies. It reflects upstream price pressures and is a leading indicator of CPI pass-through.
Machinery orders: Statistics of orders received for machinery for capital investment. Private-sector orders (excluding ships & power) are regarded as a 2–3 quarter leading indicator of business investment.
BOJ Tankan: The Bank of Japan's quarterly Tankan survey of business sentiment. It gauges firms' short-term economic assessments and expectations via indices such as the business conditions DI.
Business conditions DI: Diffusion index from the BOJ Tankan survey calculated as the percentage reporting 'favorable' minus the percentage reporting 'unfavorable'. It summarizes firms' assessment of current business conditions.
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.