Japan’s economy narrowly avoided a technical recession in Q4 2025, growing just 0.1% compared with the previous quarter, following a 0.7% contraction in Q3.

Annualized GDP rose 0.2%, below economists’ expectations of 1.6%, with private consumption supporting modest growth while exports and public spending weakened.

The Nikkei 225 edged higher after the data, though the yen weakened against the dollar, and the Bank of Japan raised its fiscal 2026 growth forecast to 1%, citing moderate expansion and a potential virtuous cycle of rising wages and prices.

Japan is also working with the U.S. on a $550 billion investment pledge, with initial projects expected to be finalized before Prime Minister Sanae Takaichi meets President Donald Trump, CNBC has reported.

Takaichi’s agenda includes boosting economic growth through proactive fiscal policy, suspending food taxes, and increasing defense spending, which analysts say could further stimulate equities and industrial cooperation with the U.S.