Quarterly economic data shows growth at an annualized 1.3%.

Japan’s economy grew faster than initially estimated in the final three months of 2025, thanks to rapid business investment, revised data showed on Tuesday, although the Middle East conflict casts a shadow over the growth outlook.

Gross domestic product rose 1.3%, quicker than the paltry 0.2% preliminary estimate and slightly overshooting economists’ median forecast for a 1.2% growth.

On a quarter-on-quarter basis without annualization, GDP grew 0.3%, matching the median forecast for a 0.3% expansion and compared with the initial estimate of a 0.1% rise.

Businesses’ capital expenditure rose 1.3% in the fourth quarter, the biggest growth since October-December 2023. It was revised up from the initial estimate for a 0.2% rise and beating the economists’ forecast for a 1.1% uptick.

Private consumption, which accounts for more than half of Japan’s economy, increased 0.3%, little changed from a 0.1% uptick in the preliminary data.

External demand, or exports minus imports, was unchanged from the preliminary data of no contribution to GDP. Domestic demand contributed 0.3 percentage point, revised up from zero contribution.

The fourth-quarter growth followed an 2.6% contraction in July-September and a 2.4% expansion in April-June. The size of Japan’s nominal GDP amounted to 663.8 trillion yen ($4.2 trillion) last year after the revision, the data showed.

The Bank of Japan has not shifted its tone on raising interest rates if the economy grows in line with its outlook, although Gov. Kazuo Ueda has said the potential hit to global growth from the Middle East conflict requires vigilance.