Tokyo, September 8, 2025 — Japan’s economic rebound gained momentum in the second quarter of 2025, with GDP growing at an annualized rate of 2.2%, far exceeding the prior estimate of 1.0%, the Cabinet Office announced Monday. On a quarter-on-quarter basis, the economy expanded by 0.5%, up from an initial 0.3% estimate.
The upward revision reflects stronger private consumption, which climbed 0.4%, up from 0.2%. Meanwhile, capital expenditure—though a positive contributor—increased more modestly at 0.6%, lower than the 1.3% originally estimated and trailing economist expectations of 1.2% growth.
Though robust exports continued to add 0.3 percentage points to GDP growth, domestic demand also turned positive, contributing 0.2 points, reversing previous contractions.
Corporate survey data supports the expansion narrative. Capital spending surged 7.6% year-on-year, driven by strong domestic demand, though manufacturer profits—especially in the automotive sector—took a hit from U.S. tariffs. Automaker profits plunged 29.7%, and overall manufacturing profit fell 11.5%.
Looking ahead, Japan’s resilience offers policymakers some latitude, despite tariff-related challenges and ongoing political uncertainty triggered by Prime Minister Ishiba’s resignation. Investors are keen on the July–September GDP data to understand whether this growth trend can be sustained into Q3 amid upcoming shifts in trade and leadership.
