Japan's Economy Grows More Than Expected On Strong Exports, Moderate Consumption

TOKYO: Japan's economy grew at a better-than-expected annual rate of 2.8 per cent in October-December, underlined by steady exports and moderate consumption. On a quarter-to-quarter basis, the world's fourth-largest economy grew 0.7 per cent for its third straight quarter of growth, the Cabinet Office reported on Monday in its preliminary data. For 2024, the Japanese economy eked out 0.1 per cent growth in seasonally adjusted real GDP, or gross domestic product, which measures the value of a nation's product and service. That's the fourth straight year of expansion. 

Japan economy grows 2.8% in Q4.

Private consumption grew at an annual rate of 0.5 per cent during the three months through December, holding up while losing momentum. Exports jumped 4.3 per cent, and capital investment increased 0.5 per cent. The positive data sent Japan's benchmark Nikkei 225 higher and other Asian markets. Some analysts think the anticipation of President Donald Trump's tariffs may have lifted trade. Unlike the US and some other nations, Japan has been dogged by deflation, and these lower prices stifle growth. However, recent wage growth has kept deflationary trends in check.

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Recent data show inflation is around the Bank of Japan's target of 2 per cent. Higher prices are crimping consumer spending, which makes up for more than half the economy. The central bank may move to further raise interest rates, which were at zero or below zero for years, to wrest the economy out of deflation. It raised its key interest rate to about 0.5 per cent from 0.25 per cent last month, noting that inflation is holding at a desirable target level. The next monetary policy meeting is in March. "Stronger growth may reinforce expectations for the Bank of Japan to push through with further hikes, while the slowdown in private consumption growth may be addressed by the prospects of higher wages ahead," said Yeap Jun Rong, market strategist at IG.