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 that GDP grew 0.7% quarter on quarter, more than the 0.3% rise expected by economists polled by Reuters. It expanded by 0.4% in the previous quarter.
A jump in exports helped boost GDP, while domestic demand was a drag on growth, contracting marginally. Capital expenditure also rose 0.5% quarter-on-quarter, but missed Reuters estimates of a 1% rise.
The GDP data 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.
Speaking to CNBC’s “Street Signs Asia,” Stefan Angrick, associate director and senior economist at Moody’s Analytics, said that while the headline numbers “all look great,” its not all “sunshine and rainbows.”
“The only reason the economy expanded in 2024 is because of revisions to historical data, and once you strip those out, GDP would have contracted,” he said.
Angrick also noted that GDP was supported by net exports from the county, amid declining imports.
“That speaks to the weakness in domestic demand, which is really the story we’ve been dealing with over the last two to three years … people probably want to be careful and maybe keep the champagne on ice. It’s probably not the time to celebrate.”
Citi economist Katsuhiko Aiba warned earlier this month that consumer spending will remain weak in the first quarter of 2025, 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.
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.
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.
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