Japan’s economy outperformed forecasts as business spending and net trade helped fuel a third straight quarter of growth that will keep the Bank of Japan on track for further interest rate hikes. The yen strengthened.
Gross domestic product grew at an annualized pace of 2.8 percent in the three months through December from the prior period, the Cabinet Office reported Monday. That compared with a revised 1.7 percent clip in the previous period and beat the 1.1 percent consensus.
While Monday’s data showed that Japan’s economy continues to grow steadily, there were also pockets of weakness in the report. Net exports grew in part because imports fell, casting a doubt on the health of domestic demand.
Private consumption edged higher in the quarter, exceeding forecasts, but it slowed markedly versus the prior quarter. On an annual basis, the value of private consumption was lower in 2024 than it was a decade earlier.
Even so, the numbers will likely give central bank authorities confidence they can continue to look for opportunities to unwind the BOJ’s ultraeasy policy settings with gradual rate hikes.
“Personal consumption has slowed down a lot and inflation is weighing on consumption because real wages struggle to pick up,” said Yuichi Kodama, economist at Meiji Yasuda Research Institute. “However, overall, the economy is growing, so the BOJ will probably continue to be on track and raise interest rates gradually.”
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