Japan's Economy Grows at 2.8% Annual Rate in October-December
Tokyo, Japan - Japan's economy expanded at an annualized rate of 2.8% in the October-December quarter, exceeding expectations. This growth is attributed to robust exports and a sustained level of consumption.
On a quarterly basis, the world's fourth-largest economy grew by 0.7%, marking its third consecutive quarter of expansion, as per preliminary data released by the Cabinet Office on Monday.
For the calendar year 2024, Japan's economy recorded a modest growth of 0.1% in seasonally adjusted real GDP, representing the fourth straight year of economic expansion. Private consumption increased at an annual rate of 0.5% during the October-December quarter, maintaining stability despite a slight deceleration.
Exports surged by 4.3%, while capital investment saw a 0.5% increase. The positive economic indicators boosted the Nikkei 225 as well as other Asian stock markets. Analysts speculate that anticipation surrounding President Donald Trump's tariffs may have contributed to the trade uptick.
Unlike the United States and other countries, Japan has faced ongoing deflationary pressures, which have dampened economic growth. However, recent wage growth has helped mitigate these deflationary trends. Data indicates that inflation is currently hovering around the Bank of Japan's target of 2%.
Rising prices have, however, put pressure on consumer spending, which accounts for more than half of the economy. The central bank may consider further interest rate hikes to combat deflation. Last month, it raised its key interest rate from 0.25% to 0.5%, citing that inflation was holding at a desirable level. The next monetary policy meeting is scheduled for March.
"Stronger growth may amplify expectations for the Bank of Japan to proceed with additional rate hikes, while the slowdown in private consumption growth could be offset by prospects of higher wages," said Yeap Jun Rong, market strategist at IG.