Commercial and residential buildings at dusk in the Minato district of Tokyo, Japan.
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Japan’s economic expansion in the fourth quarter beat analysts’ expectations for quarter-on-quarter and annualized growth, boosted by a jump in exports, preliminary government data showed Monday.
GDP grew 0.7% quarter on quarter, more than the 0.3% rise expected by economists polled by Reuters. It had expanded by a revised 0.4% in the previous quarter.
A jump in exports growth compared with the prior quarter helped boost GDP, while domestic demand was a drag on growth, contracting marginally.
Japan’s November and October household spending contracted 0.4% and 1.3%, respectively, year on year in real terms, but it rose 2.7% in December — massively beating expectations from economists polled by Reuters and marking its first rise since July 2024.
Still, Citi economist Katsuhiko Aiba warned earlier this month that consumer spending will remain weak in the first quarter, forecasting a full-scale recovery after the second quarter.
He said that real wage growth is likely to remain negative in the first quarter as well, despite government energy subsidies resuming, pressured by pass-through inflation from yen depreciation.
The GDP data on Monday comes against the backdrop of Japan’s central bank raising rates to 0.5%, their highest level since October 2008, and offers it more room to stick with monetary tightening.
On an annualized basis, GDP grew 2.8%, exceeding Reuters estimate of 1%.
Japan’s economy grew 1.2% year on year in the fourth quarter, compared with the 0.6% rise in the third quarter.
Despite the better-than-expected growth in the fourth quarter, full-year GDP growth slowed to 0.1%, a sharp fall from the 1.5% growth seen in 2023.
The Nikkei 225 fell 0.29% after the data release, while the yen strengthened 0.2% to trade at 152.02 against the dollar.