Japan’s Economy Barely Grew in Q4, Misses Forecasts

Reuters

11:07 JST, February 16, 2026

TOKYO, Feb 16 (Reuters) – Japan’s economy eked out an annualized 0.2% expansion in the October-December quarter, government data showed on Monday, scraping back to growth as corporate investment only just reversed its previous decline.

The reading suggests the drag from U.S. tariffs is fading slowly, giving the Bank of Japan reason for cautious confidence as it keeps lifting interest rates to normalize monetary policy.

Fresh off a sweeping election victory, Prime Minister Sanae Takaichi’s government is also preparing to ramp up investment through targeted public spending in sectors seen as vital to economic security.

The increase in gross domestic product, however, fell short of a median market estimate of a 1.6% gain in a Reuters poll, and followed a larger revised 2.6% contraction in the previous quarter.

The reading translates into a quarterly rise of 0.1%, weaker than the median estimate of a 0.4% uptick.

Economists project the world’s fourth-largest economy would continue to expand at a gradual pace in coming months.

A survey this month by the Japan Center for Economic Research showed 38 economists forecast an average annualized growth of 1.04% in the first quarter and 1.12% in the second quarter this year.

Private consumption, which accounts for more than half of economic output, rose 0.1% in October-December, matching market estimates.

It cooled from the 0.4% rise in the previous quarter, indicating that persistently high food costs remain a drag on household spending.

Capital spending, a key driver of private demand-led growth, rose 0.2% in the fourth quarter, versus a rise of 0.8% in the Reuters poll.

Net external demand, or exports minus imports, contributed nothing to growth, versus a 0.3 point drag in the July-September period.

Exports posted a milder drop after the United States formalized a baseline 15% tariff on nearly all Japanese imports, down from 27.5% on autos and initially threatened 25% on most other goods.