Japan’s economy barely grows in the last quarter as exports slow, with 2025 expansion just 1.1%.

February 16, 2026 - 08:00

Japan's economy barely avoided a contraction in the final months of last year, posting meager growth that underscores persistent challenges. The world's fourth-largest economy expanded at an annualized rate of just 0.2% in the October-December quarter, a significant slowdown driven primarily by weak exports.

The data reveals a troubling reliance on domestic demand, with private consumption providing the only modest support. A sharp decline in exports, particularly to key markets like China, acted as the major drag on growth. This external weakness offset gains from business investment, painting a picture of an economy struggling for momentum.

Looking ahead, the forecast remains subdued. The government's projection for expansion in the coming fiscal year stands at a tepid 1.1%, reflecting concerns over global economic uncertainty and sluggish demand. Analysts point to the persistent weakness of the yen, which has failed to provide its traditional boost to export volumes, as a continuing headwind.

The latest figures intensify the pressure on policymakers at the Bank of Japan as they navigate a path away from long-standing ultra-loose monetary policies. With inflation still above target but consumer spending fragile, the central bank faces a complex balancing act to foster sustainable growth without destabilizing the economy.