TOKYO (AP) — Japan's economy demonstrated stronger-than-expected growth, marking an annual rate of 2.8% during the October to December period. This growth was primarily fueled by steady exports and moderate levels of private consumption, as reported by the Cabinet Office in its preliminary findings.
On a quarterly basis, Japan, the world's fourth-largest economy, recorded a growth rate of 0.7%, maintaining its upward trend for the third consecutive quarter. The preliminary data indicated that for the year 2024, Japan achieved a slight growth of 0.1% in seasonally adjusted real GDP, which measures the overall value of the country's goods and services. This achievement signifies the fourth consecutive year of economic expansion for Japan.
Private consumption during the three-month period ending in December rose at an annual rate of 0.5%. Despite this positive growth, the momentum behind consumer spending appears to be slowing. Exports, however, experienced a notable increase, jumping by 4.3%. Additionally, capital investment saw a modest gain of 0.5% during the same period.
The favorable economic indicators positively impacted Japan's benchmark stock index, the Nikkei 225, causing it to rise, along with other markets across Asia. Some analysts speculate that expectations surrounding President Donald Trump’s tariffs may have contributed to the uplift in trade figures.
In contrast to the United States and several other nations, Japan has been grappling with persistent deflation, which hinders economic growth. However, recent wage increases have helped to stabilize deflationary pressures. Current reports suggest that inflation has reached approximately 2%, aligning with the Bank of Japan's inflation target. Despite this, rising prices have begun to restrain consumer spending, which accounts for more than half of Japan’s economic activity.
The Bank of Japan has indicated the possibility of further interest rate hikes, having recently raised its key rate from 0.25% to approximately 0.5%. This shift marks a significant move after years of maintaining rates at zero or below in an effort to combat deflation. The central bank's next monetary policy meeting is scheduled for March, where further decisions will be made based on economic conditions.
Market strategist Yeap Jun Rong commented, “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.” The ongoing economic performance will be closely monitored for its implications on future monetary policy decisions.
As Japan continues to navigate these economic challenges, the interplay between inflation, consumer behavior, and central bank interventions will be crucial for maintaining its growth trajectory amidst global uncertainties.
