Mon Feb 17 09:18:16 UTC 2025: ## Japan’s Economy Shows Unexpected Strength Despite Slowdown
**Tokyo, February 17, 2025** – Japan’s economy defied expectations, posting better-than-anticipated growth in the final quarter of 2024, despite a significant overall slowdown for the year. Preliminary data released by the Cabinet Office revealed a 2.8% annualized growth rate for October-December, driven by robust exports and moderate consumer spending. This marks the third consecutive quarter of growth.
While the full-year growth for 2024 was a modest 0.1%, marking a fourth consecutive year of expansion, the fourth-quarter figures exceeded market forecasts. Exports surged by 4.3%, and capital investment saw a 0.5% increase. Private consumption, though slowing, still grew at an annual rate of 0.5%. The positive news sent the Nikkei 225 index soaring, boosting other Asian markets as well. Some analysts attribute the improved trade figures to anticipation of potential tariffs under the Trump administration.
Despite the positive fourth-quarter results, Japan continues to grapple with deflation, a persistent issue that historically hinders economic growth. However, recent wage increases have mitigated deflationary pressures, with inflation currently near the Bank of Japan’s 2% target. The central bank’s recent interest rate hike from 0.25% to 0.5% reflects this progress, and further hikes are anticipated. Higher prices, while meeting the inflation target, are impacting consumer spending, which accounts for over half of Japan’s economy. The Bank of Japan’s next monetary policy meeting is scheduled for March. Market strategists like Yeap Jun Rong of IG believe the strong growth may encourage further interest rate hikes, while the slower private consumption growth could be offset by projected wage increases.
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