Japan's economy showed resilience in Q4 2025, returning to growth with a modest 0.1% quarterly expansion despite falling short of economist expectations. The GDP rebound comes after a significant 2.3% contraction in the previous quarter, signaling potential economic stabilization. Supported by softer US inflation data, Asian markets responded positively, with the Nikkei 225 climbing 0.4%. Private consumption and business spending demonstrated slight improvements, while the GDP Deflator indicated persistent underlying price pressures at 3.4% year-on-year. The Bank of Japan may view these results as a cautious signal for potential continued interest rate normalization. Currency markets reflected the nuanced economic landscape, with the USD/JPY pair gaining 0.24% and trading at 153.04.
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