Japan’s economy limps back to scant growth in Q4, raises test for Takaichi

A survey this month by the Japan Center for Economic Research showed 38 economists forecast an average annualised growth of 1.04 per cent in the first quarter and 1.12 per cent in the second quarter this year.

Kobayashi said the GDP report is unlikely to affect the Bank of Japan‘s monetary policy decisions. “Rather than this rate hike causing the economy to stall, the BOJ’s focus is likely to be on how to contain inflation,” he said.

Private consumption, which accounts for more than half of economic output, rose 0.1 per cent in October-December, matching market estimates.

It cooled from the 0.4 per cent rise in the previous quarter, indicating that persistently high food costs remain a drag on household spending.

Capital spending, a key driver of private demand-led growth, also rose at a slow pace of 0.2 per cent in the fourth quarter, versus a rise of 0.8 per cent in the Reuters poll.

Net external demand, or exports minus imports, contributed nothing to growth, versus a 0.3 point drag in the July-September period.

Exports posted a milder drop after the United States formalised a baseline 15 per cent tariff on nearly all Japanese imports, down from 27.5 per cent on autos and initially threatened 25 per cent on most other goods.

“The impact of tariffs appears to have peaked in July-September, but judging from the latest results, there is at least some possibility that firms will continue to take a somewhat cautious stance going forward,” Meiji Yasuda’s Maeda said.