Japan’s Economic Growth in Q4 2024

By Kantaro Komiya

TOKYO (Reuters) – Japan’s economy likely expanded in the final three months of 2024, indicating the third consecutive quarter of growth, according to a Reuters poll. This growth is attributed to strong business investment, overshadowing weak consumption.

The Bank of Japan increased short-term interest rates last month to the highest level in 17 years. The growth momentum of Japan, the world’s fourth-largest economy, will play a crucial role in determining the rate hike schedule for this year.

Forecasts indicate Japan’s real gross domestic product (GDP) rose by an annualized 1.0% in October-December, slightly below the revised 1.2% expansion recorded in July-September. The projected quarter-on-quarter growth rate for the fourth quarter is expected to be 0.3%, consistent with the previous quarter.

Private consumption, accounting for over half of Japan’s economic output, is predicted to have decreased by 0.3%, down from a revised estimate of 0.7% in the third quarter. Analysts highlight the impact of a three-year decline in real wages, which is hindering households’ purchasing power.

Conversely, following a negative reading in the previous quarter, capital expenditure is expected to rise by 1.0%. Companies’ investment remains robust, driven by labor shortages, recent data suggests.

Saisuke Sakai, chief economist at Mizuho Research & Technologies, commented, “The headline figure was inflated by the positive external demand contribution due to shrinking imports, while consumption and exports contracted; the internal situation is not quite good.” He also noted that while capital expenditure is expected to continue growing in January-March, sluggish consumption due to weak real wages and a slowdown in the U.S. and Chinese economies may hinder exports.

The GDP data will be released on February 17 at 8:50 a.m. (2350 GMT on February 16).

Additionally, a separate report from the Bank of Japan is anticipated to show Japan’s wholesale inflation rose by 0.3% month-on-month in January, consistent with the previous month’s rate. This indicator, measuring prices of goods that firms charge each other, will be published on February 13 at 8:50 a.m. (2350 GMT on February 12) and is expected to reveal a 4.0% increase from a year ago, surpassing December’s 3.8% growth.