Japan's economy returned to growth in October-December 2025, after the previous quarter's slump, supported by a gradual recovery in private consumption against a backdrop of slowing inflation and lower energy prices.
Seasonally adjusted real GDP rose at an annualised rate of 0.2pc in the October-December quarter, following a 2.6pc decline in July-September, according to preliminary government data released on 16 February.
Private consumption, which accounts for more than 50pc of the country's GDP, grew by 0.4pc on an annualised basis in October-December from the previous quarter. Meanwhile, private residential and non-residential investment rose by 20pc and 1pc, respectively. The increase offset a 0.8pc decline in public demand over the same period.
Signs of a rebound in private consumption have emerged, with real employee income recovering moderately, said a monthly economic report for January published by Japan's Cabinet Office.
The inflation rate for the Tokyo metropolitan area eased to 2pc in December from 2.7pc in November, reflecting a slowdown in food price increases, the report said. Meanwhile, energy prices fell on the year owing to government subsidy effects, it added.
Tokyo raised its gasoline subsidy from 13 November to cap the country's retail gasoline prices, aiming to facilitate the scrapping of its provisional tax of ¥25.10/litre ($0.16/litre) on gasoline, which was eventually abolished on 31 December 2025.
Japan's retail gasoline prices averaged ¥161.55/litre during the four weeks to 22 December 2025, down by 8.7pc from ¥176.88/litre a year earlier, according to data from trade and industry ministry Meti.
Removing the extra tax was a central pillar of Japan's emergency economic revamp package aimed at tackling inflation, introduced after Sanae Takaichi, a Liberal Democratic Party leader became prime minister in October 2025.
Japan's energy utilisation costs in December also appeared to have declined following lower fuel import costs, even before the new government resumed subsidies for retail electricity and city gas supplies during the January-March winter heating season. A typical household bill for electricity consumption of 260kWh in the Tokyo metropolitan area would total ¥8,639/kWh in December, down from ¥8,868/kWh a year earlier, according to earlier estimates from utility Tokyo Electric Power in October 2025.
Lower energy costs reflected weaker import prices of generation fuels. The country's import costs for LNG averaged ¥84,044/t for July-September 2025, down by 10pc from a year earlier, data from Japan's finance ministry show. The fall in import costs was reflected in utility bills for December.
The Japan Crude Cocktail (JCC), Japan's monthly average price of crude delivered to the country, averaged ¥10,602/bl for July-September, down by 19pc from a year earlier. The country's import costs for thermal coal fell by 24pc to an average of ¥17,538/t during the period.
The economic growth in the October-December quarter sent Japan's full-year 2025 real GDP growth to 1.1pc from a year earlier. Nominal GDP totalled ¥662.8 trillion, exceeding ¥600 trillion for the third consecutive year.
