–Q4 GDP to Confirm Tepid Rebound, January Trade to Indicate Solid Export Growth, Q4 Machine Orders Seen Up, Inflation Easing Further
By Max Sato
(MaceNews) – Here are the key Japanese events for the coming week. Prime Minister Sanae Takaichi will go through a largely ceremonial parliamentary vote on Wednesday to be re-elected after the Feb. 8 general election. Takaichi’s conservative Liberal Democratic Party scored a supermajority in the powerful House of Representatives while the opposition camp remains largely fragmented.
The GDP data for the final quarter of 2025 is expected to confirm Japan’s wobbly but resilient economic recovery, overcoming the drag from the trade war launched by the Trump administration about a year ago. Looking ahead for the first quarter of 2026, economists see a modest growth rate of about 1% at an annualized pace after an estimated 1.7% rebound in Q4 on the 2.3% slump in Q3, which was the first contraction in six quarters.
January trade data is expected to show solid demand for Japanese computer chips, non-ferrous metals and construction machinery continues to mitigate the impact of stiff Trump tariffs that promoted a year-on-year decline in exports of autos and auto parts to the U.S. market. On a technical note, both exports and imports tend to show irregular patterns around the Lunar New Year holidays in some Asian countries. Chinese markers are closed from Feb. 16 until Feb. 23 this year.
Inflation is expected to show continued deceleration in all three key CPI measures in January as gasoline prices are down and markups in processed food prices are slowing, which should support consumer confidence. Yet, many households are still cautious about spending much beyond necessities amid falling real wages.
– Monday, Feb. 16
0850 JST (2350 GMT/1850 EST Sunday, Feb. 15) The Cabinet Office releases the October-December quarter GDP.
Mace News median: +0.4% q/q (range +0.2% to +0.6%) vs. Q3 revised -0.6%; +1.7% annualized (range +0.7% to +2.6%) vs. Q3 revised -2.3%; +0.9% y/y (range +0.3% to +1.1%) vs. Q3 revised +0.6%
The Japanese economy is forecast to post a slight 0.4% rebound on quarter, or an annualized 1.7%, in the October-December quarter, reversing its first contraction in six quarters in July-September, when it shrank 0.6% q/q (2.3% annualized).
Domestic demand is expected to add 0.4 percentage point to the Q4 GDP vs. -0.4 point in Q3 while net exports (exports minus imports) are seen lifting total domestic output by 0.1 point vs. -0.2 point previously. Private consumption, which accounts for about 55% of the total domestic output, is projected to be resilient, rising 0.2% q/q for a seventh straight gain, after growing at the same pace in Q3. Business investment in equipment and software is also forecast to post a rebound backed by the need to address widespread labor shortages.
Consensus forecasts for key components in percentage change on quarter except for domestic demand, private inventories and net exports, whose contributions are in percentage points. Figures in the previous quarter are in parentheses:
GDP q/q: +0.4% (-0.6%); 1st rise in 2 qtrs
GDP annualized: +1.7% (-2.3%); 1st rise in 2 qtrs
GDP y/y: +0.9% (+0.6%); 6th straight rise
Domestic demand: +0.4 point (-0.4 point); 1st rise in 2 qtrs
Private consumption: +0.2% (+0.2%); 7th straight rise
Business investment: +0.7% (-0.2%); 1st rise in 2 qtrs
Public investment: -0.3% (-1.1%); 3rd straight drop
Private inventories: -0.1 point (-0.1 point); 2nd straight drop
Net exports (external demand): +0.1 point (-0.2 point), 1st rise in 2 qtrs
– Wednesday, Feb. 18
– Prime Minister Sanae Takaischi is expected to be re-elected at the start of a 150-day special session of the Diet after she led her conservative Liberal Democratic Party to a landslide win in the Feb. 8 lower house election.
Lawmakers usually return to parliament for a 150-day ordinary session around Jan. 20 to discuss key issues but the schedule for debating the budget for fiscal 2026 has been delayed by the general election. Takaichi dissolved the House of Representatives on Jan. 23.
– Wednesday, Feb. 18
0850 JST (2350 GMT/1850 EST Tuesday, Feb. 17) The Ministry of Finance releases January trade.
Mace News median: exports +11.9% y/y (range: +4.9% to +14.5%) vs. Dec +5.1%; imports +3.1% y/y (range: -2.4% to +7.0%) vs. Dec revised +5.2%; trade deficit ¥2.21 trillion (range: a deficit of ¥2,461.70 billion to a deficit of ¥1,776.80 billion) vs. a revised ¥113.49 billion surplus in December; ¥2.74 trillion deficit in January 2025
Japan’s export values are forecast to post a fifth straight rise on year in January, up 11.9% vs. +5.1% in December, weathering the drag from U.S. trade rows and riding the wave of recovering demand from Europe and Asia. Exports hit a record high of ¥10.4 trillion in December 2025, overcoming the U.S. tariff headwind on autos and metals.
The trade balance is projected to mark a deficit of ¥2.21 trillion, which would be the first shortfall in three months, following a revised ¥113.49 billion surplus in December. It compares with a ¥2.74 trillion deficit recorded in January 2025.
– Thursday, Feb. 19
0850 JST (2350 GMT/1850 EST Wednesday, Feb. 18) The Cabinet Office releases December and fourth-quarter machinery orders as well as the official outlook for the January-March quarter.
Mace News median: core orders +3.2% m/m (range: +1.0% to +5.0%) vs. Nov -11.0%; +1.0% y/y (range: -0.5% to +4.4%) vs. Nov -6.4%
Japan’s core machinery orders, a key leading indicator of business investment in equipment and software, are forecast to post a solid 3.2% rise on the month in December, backed by persistent demand for computers for automation and digitization aimed at alleviating labor shortages. It would partially make up for a sharper-than-expected 11.0% pullback in November after a 7.0% jump in October.
In the October-December quarter, the core measure is forecast by economists to mark a 2.7% rebound on quarter after slipping 2.1% in July-September, edging up 0.4% in April-June and rising 3.9% in January-March. That would be much stronger than the official projection of a slight 0.2% increase.
The Cabinet Office is expected to maintain its assessment that machinery orders are “showing signs of a pickup.” In the October report, it upgraded its view for the first time in 11 months.
From a year earlier, core orders excluding those from electric utilities and for ships are projected to rise a modest 1.0% after falling 6.4% in November for the first drop in 14 months and surging 12.5% in October.
– Friday, Feb. 20
0830 JST (2330 GMT/1830 EST Thursday, Feb. 19) The Ministry of Internal Affairs and Communications releases January CPI.
Mace News median: total CPI +1.6% y/y (range: +1.5% to +1.7%) vs. Dec+2.1%; core CPI (ex-fresh food) +2.1% y/y (range: +2.0% to +2.1%) vs. Dec +2.4%; core-core CPI (ex-fresh food, energy) +2.7% y/y (range +2.6% to +2.8%) vs. Dec +2.9%
The year-on-year increase in the core CPI (excluding fresh food) is forecast to ease to a two-year low of 2.1% in January, down from 2.4% in December and 3.0% in November. It would be the lowest since 2.0% in January 2024 and coming in line with the Bank of Japan’s target to guide inflation to around 2% in the long run.
The annual rate of the total CPI is expected to slow sharply to a 46-month low of 1.6% (the lowest since 1.2% in March 2022) from 2.1% in December and 2.9% in the prior month. The prices of fresh vegetables and fruits surged in early 2025 on poor crops of 2024 but have now shown a pullback, cooling off the overall inflation rate. Underlying inflation, as measured by the core-core CPI that excludes both fresh food and energy, is seen easing further to 2.7% from 2.9%.