Investing.com-- Japan’s economy blew past expectations in the fourth quarter, gross domestic product data showed on Monday, as a recovery in exports helped offset sluggish private consumption.
GDP grew 0.7% quarter-on-quarter, government data showed. The print was higher than expectations of 0.3%, and also picked up from the 0.4% seen in the prior quarter- which was revised upwards from 0.3%.
GDP grew 2.8% year-on-year, accelerating sharply from the 1.7% seen in the prior quarter, which was revised upwards.
The strong Q4 reading was driven chiefly by a recovery in capital expenditure and external demand, as Japanese businesses ramped up spending while export demand improved. Japanese exporters were also seen front-loading exports through Q4 in anticipation of higher trade tariffs under U.S. President Donald Trump, who took office in January.
Trump outlined plans to impose steep tariffs on steel and aluminum imports, and also slapped China with a 10% duty.
Still, strength in exports and capital spending helped offset a slowdown in private consumption growth, which slowed to 0.1% q-o-q in Q4 from 0.7% in the prior quarter.
The reading suggested that growth in Japanese consumer spending, which has so far been a major driver of the economy, may be cooling after a strong 2024.
Monday’s GDP data comes just weeks after the Bank of Japan hiked interest rates by 25 basis points, citing increasing confidence in the Japanese economy, especially on robust consumer spending.
Private consumption was a key driver of Japan’s economy over the past year, helped chiefly by strong wage growth. This trend is expected to continue in 2025, with the BOJ already projecting another round of bumped wage hikes from springtime wage negotiations between labor unions and major employers.