By Chikafumi Hodo
TOKYO (MaceNews) – Backed by gains in capital investment, gradual rises in exports, and continuing modest recovery in private consumption, Japan’s real gross domestic product is expected to rebound and post its first positive growth in two quarters in the October–December period, following a sharp contraction in the previous quarter. Still, the recovery lacks clear drivers, as both capital expenditure and consumption remain short of strong momentum, with prices continuing to trend higher.
Preliminary Q4 GDP data due from the Cabinet Office at 8:50 a.m. JST on Monday, Feb. 16 (2350 GMT/1850 EST, Sunday, Feb. 15), is forecast to rise 0.4 percent from the previous quarter, or an annualized gain of 1.7 percent, after falling 0.6 percent, or an annualized drop of 2.3 percent, in the July–September period, which marked the first contraction in six quarters.
Capex Seen Turning Positive
Capital investment is expected to have turned positive in the October–December quarter, gaining 0.7 percent after contracting 0.2 percent in July–September. Labor-saving investment driven by labor shortages, along with demand related to artificial intelligence, is seen leading the overall increase.
With corporate profits remaining at elevated levels and continued support from digitalization, labor-saving investment and research and development spending, business investment appears to be maintaining a moderate upward trend on average. However, rising prices and lingering uncertainty over President Trump’s tariffs are expected to restrain firms’ appetite for investment.
The Ministry of Economy, Trade and Industry’s industrial output data released Jan. 30 also suggested that capital expenditure in Q4 GDP may be firmer. Capital shipments, excluding transport equipment, rose a solid 3.9 percent on the quarter in the October–December period, after falling 3.6 percent in the previous quarter.
Exports to Support Growth
Housing investment is expected to rise on the quarter after falling sharply in July–September due to implementation of revised building standards regulations in April 2025. Given the subsequent recovery in housing starts, housing investment is likely to have rebounded modestly in the October–December quarter.
Despite the impact of U.S. tariffs on domestic auto-related businesses, exports are expected to have risen in Q4 and contributed to overall growth. Exports are forecast to have edged up 0.1 percentage point after falling 0.1 point in the July-September quarter. Exports to the U.S. have recovered, while shipments to Asia and Europe posted solid gains, offsetting the drag from tariffs.
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: