Tokyo (AFP) – Japan recorded a very small jump in its growth in the fourth quarter of 2025, less marked than expected, reinforcing pressure on Prime Minister Sanae Takaichi to strengthen her support measures... even if it means increasing debt.

Published on: 02/16/2026 - 09:49

Gross domestic product (GDP), stimulated at the end of the year by government stimulus measures, increased by 0.1% over the October-December period compared to the previous quarter, according to official statistics published on Monday.

This slight rebound certainly reflects an improvement after the contraction of 0.7% (revised figure) recorded in the third quarter but it turns out to be well below the expectations of economists surveyed by the Bloomberg agency (+0.4%).

Over the whole of 2025, the GDP of the world's fourth largest economy recorded growth of 1.1%, recovering after a decline of 0.2% in 2024. But the weak performance at the end of the year reflects a darkened horizon.

Having become the first woman to govern Japan in October, Ms. Takaichi had certainly announced in November a recovery plan of 117 billion euros, with energy subsidies and checks to households, to relieve consumers of persistent inflation and stimulate activity.

Consumer prices in Japan increased by 2.4% (excluding fresh products) in December year-on-year, marking a slowdown thanks to government subsidies, but remain well above the 2% targeted by the Bank of Japan. And income growth remains below inflation.

Hence consumption remains gloomy: average household spending fell by 0.3% in December over one year, according to official figures published at the beginning of February.

“If residential investment rebounded in October-December after a plunge in the third quarter, the other components of demand remained generally sluggish”, with stagnation in business investment and a decline in public demand, deciphers Marcel Thieliant, analyst at Capital Economics.

In this context, “low growth could encourage further, even more marked fiscal easing,” he insists.

Tax gift

In fact, before the legislative elections of February 8, which granted her a very large parliamentary majority, Ms. Takaichi promised to strengthen her support measures by exempting food products from the 8% consumption tax for two years.

And this despite concerns about the cost of this tax gift, while the archipelago is already burdened by colossal debt (230% of GDP). The announcement alarmed bond markets, with yields on Japanese debt briefly jumping to record levels.

However, "the weakness of economic activity increases the probability that Takaichi not only maintains the suspension of the food tax, but also adopts a supplementary budget from the first half of the year, rather than waiting until the end of the year", estimates Mr. Thieliant.

The government is already planning a record budget again this year.

"Challenges lie ahead for the Takaichi administration as it seeks to stem Japan's prolonged decline by encouraging domestic investment in strategic sectors through proactive fiscal policy," observed UBS economists before the data was released.

Clouds

“The overall picture is hardly more encouraging. GDP has barely progressed since the start of 2023,” notes Stefan Angrick, economist at Moody's Analytics, pointing to “the observation of an economy under tension”.

After having almost stagnated in 2024, the Japanese economy, like many others, had to face the customs offensive launched by American President Donald Trump last year, even though exports are a crucial engine of growth for the archipelago.

American customs taxes remain high despite an agreement reached during the summer, and Japan's exports to the United States plunged by another 11.1% year-on-year in December.

“The Japanese economy is at a decisive turning point. Unfavorable trade prospects and fragile domestic demand are holding back growth,” emphasizes Stefan Angrick.

“And the external environment is not expected to improve anytime soon: US tariffs will remain high and competitive pressure and trade threats from China will persist in the short term,” he adds.

Because another cloud has come to darken the situation: the recent resurgence of geopolitical tensions between Tokyo and Beijing, which announced it will tighten its trade restrictions, while the flow of Chinese tourists in the archipelago dried up.

© 2026 AFP

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