Japan’s economy expanded at an annual rate of 2.8% in October-December, surpassing expectations, driven by stable exports and moderate consumer spending.
On a quarter-to-quarter basis, the world’s fourth-largest economy grew 0.7%, marking its third consecutive quarter of expansion, according to preliminary data from the Cabinet Office released Monday.
For 2024, Japan’s seasonally adjusted real GDP, which reflects the total value of goods and services produced, grew by 0.1%, extending its growth streak to a fourth straight year.
Private consumption rose at an annual rate of 0.5% in the last three months of the year, maintaining momentum despite a slowdown. Meanwhile, exports surged by 4.3%, and capital investment increased by 0.5%.
The positive economic indicators boosted Japan’s benchmark Nikkei 225 and lifted other Asian markets.
Some analysts suggest that anticipation of tariffs under former U.S. President Donald Trump may have contributed to stronger trade activity.
Unlike the U.S. and other nations, Japan has struggled with deflation, which hampers growth. However, recent wage increases have helped mitigate deflationary pressures.
Current inflation levels are close to the Bank of Japan’s 2% target, though rising prices are straining consumer spending, which accounts for more than half of the economy.
The central bank may consider further interest rate hikes after keeping rates at or below zero for years to combat deflation. Last month, it raised its key interest rate from 0.25% to 0.5%, citing stable inflation. The next monetary policy meeting is scheduled for March.
“Stronger growth may reinforce expectations for the Bank of Japan to proceed with further rate hikes, while slowing private consumption growth could be offset by the potential for higher wages,” said IG market strategist Yeap Jun Rong.
