Japan avoids technical recession with weak 0.1% fourth-quarter growth

Japan posted a 0.1% increase in fourth-quarter output, which kept the country out of a technical recession but did not meet the 0.4% call from economists.

The number reversed the 0.7% fall recorded in the third quarter, yet the gain stayed very small. The annualized reading reached 0.2%, far below the 1.6% forecast and coming after a 2.3% fall in the prior quarter. Year-on-year growth landed at 0.1%, slowing from 0.6%, and the Cabinet Office data pointed to private spending as the only strong part.

Weak exports and public spending continued to weigh on the economy. Right after the release, the Nikkei 225 opened 0.12% higher, while the yen dropped 0.25% to 153.06 against the dollar.

Crypto traders watching macro trends noted how slow growth can feed into risk mood, and many kept a close eye on how Japan moves next.

Central bank raises outlook and pushes moderate expansion

Bank of Japan raised its growth view in January for the fiscal year ending March 2026, moving its forecast from 0.7% to 0.9%. It also lifted the fiscal 2026 outlook from 0.7% to 1%.

The central bank said it expects moderate expansion as other regions pick up speed. It pointed to a cycle where wages and prices rise together, backed by government steps and easy financial conditions. This update came as Japan worked with the U.S., its second-largest trading partner, on a $550 billion investment pledge tied to their trade deal.

NHK said last Friday that both sides still have no agreement on which projects will come first. Economy Minister Ryosei Akazawa said he wanted the first deals done before Prime Minister Sanae Takaichi meets U.S. President Donald Trump.

Trump had announced the meeting before the Feb. 8 Lower House election. That vote gave Takaichi and the Liberal Democratic Party a wide win.

After the result, Takaichi said she would back growth by raising investment through “proactive” fiscal steps, though she did not go into detail. She had already promised a two-year break on food taxes and a move to lift defense spending to 2% of GDP.

These plans now sit against fresh soft data from Japan, which keeps drawing attention from anyone watching global liquidity, including crypto traders who track how big economies shape risk markets.

Regional markets respond and track weak Japan data

Asian markets spent Monday in quiet trade as the Lunar New Year kept China, South Korea, and Taiwan shut. Currencies and bonds held steady, while precious metals saw new pressure through the morning.

The weak numbers from Japan pulled some heat out of last week’s strong market run. The country recorded only 0.2% annualized growth for the December quarter, far under the 1.6% call. Government spending acted as a drag again. The result added more weight on Takaichi’s push for a larger fiscal path.

The Nikkei inched 0.2% higher after rising 5% the week before. MSCI’s Asia-Pacific index outside Japan gained 0.4%. South Korea’s tech-heavy market climbed 8.2% for the week, while Taiwan rose almost 6%.

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