TOKYO — The Japanese economy experienced a surprising annual growth rate of 2.8% in the final quarter of the year, driven by consistent exports and steady consumption levels.
According to preliminary data released by the Cabinet Office, Japan’s GDP grew by 0.7% compared to the previous quarter, marking the third consecutive quarter of growth for the nation, which is the fourth largest economy in the world.
For the year 2024, Japan managed to achieve a modest 0.1% increase in its seasonally adjusted real GDP, reflecting the ongoing expansion for the fourth straight year.
During the three-month period ending in December, private consumption rose at an annual rate of 0.5%, showing resilience even as it began to lose momentum. Exports soared by 4.3%, and there was a 0.5% uptick in capital investment.
This encouraging economic data contributed to an increase in Japan’s benchmark Nikkei 225 index, along with a boost in other Asian financial markets.
Some experts suggest that the looming tariffs from the U.S. administration may have positively influenced trade dynamics.
In stark contrast to the United States and various other countries, Japan has faced persistent deflation, with lower prices hampering economic growth. However, recent increases in wages have helped mitigate these deflationary tendencies.
Current statistics indicate that inflation is hovering around the Bank of Japan’s target of 2%. Rising prices are beginning to affect consumer spending, which constitutes over half of the economy.
In response to inflation trends, the central bank might contemplate further interest rate hikes, having maintained rates at or below zero for several years to combat deflation. Last month, they raised the key interest rate from 0.25% to approximately 0.5%, citing stable inflation at acceptable levels. The next meeting regarding monetary policy is scheduled for March.
Market strategist Yeap Jun Rong commented that stronger economic growth could bolster expectations for the Bank of Japan to implement additional rate increases, while the recent slowdown in private consumption growth might be countered by the anticipation of increased wages in the near future.