The Japanese economic growth rate exceeds expectations, providing support for the Bank of Japan to further raise interest rates.

Revised estimated data shows that the Japanese economy at the end of 2025 is more robust than initially expected, providing reasons for further interest rate hikes. Stronger-than-expected capital spending drove fourth-quarter real GDP growth at an annualized rate of 1.3%, compared to the preliminary estimate of 0.2% growth. On a quarterly basis, the country's economy grew by 0.3%. This result may support the Bank of Japan's continued tightening of policies, but the economic uncertainty caused by the Middle East tensions adds unpredictability. BOJ Governor Haruhiko Kuroda stated last week that the central bank will continue to raise interest rates as needed, noting that a virtuous cycle of wage and price increases has begun to form. Rising oil prices may exacerbate inflation expectations for Japanese businesses and households, and if the Bank of Japan continues to delay action until uncertainty is eliminated, the risk of falling behind the situation in dealing with rising prices will increase. Upwardly revised fourth-quarter data shows strong performance in the corporate sector. Capital expenditure grew by 1.3% from the previous quarter, exceeding the preliminary estimate of 0.2% growth. Private consumption also increased from the initial data of 0.1% growth to 0.3% growth.