Japan’s economic growth slowed sharply last year, official data revealed on Monday, although the figure for the fourth quarter exceeded expectations.
The figures come as Japanese companies fret over the impact of U.S. President Donald Trump’s protectionist trade policies, including import tariffs, on the world’s fourth-largest economy.
The data showed that the gross domestic product (GDP) expanded by 0.1% in 2024, well down from 1.5% the previous year.
But the figures for October-December were brighter.
Quarter-on-quarter growth accelerated to 0.7%, from 0.4% in July-September, when a “megaquake” alert and one of the fiercest typhoons in decades dampened activity.
The fourth quarter figure also exceeded market expectations of 0.3% growth.
“On the surface, Japanese GDP growth in the final stretch of 2024 looks like a turning point,” said Stefan Angrick of Moody’s Analytics.
“But don’t break out the Champagne just yet. Japan’s preliminary GDP figures are notoriously choppy, and sizable revisions are common,” he warned.
“The upbeat headline figure masks a domestic economy still stuck in the mud. Consumption is weak as pay gains have trailed inflation for over three years,” Angrick said.
“And given the worsening outlook for global trade, Japan won’t be able to count on exports to pick up the slack in 2025.”
Trump said last week that he planned to unveil tariffs on imported cars from around April 2, adding to a cascade of levies he has threatened since taking office.
Ahead of the latest GDP data, the Daiwa Institute of Research said, “Various growth factors are seen, including normalization of production for motor vehicles.”
“A strong appetite for capex spending on the part of corporations and a comeback for inbound consumption” were also positive factors, the institute said in a report.
This time last year, Germany overtook Japan as the world’s third-biggest economy, with India projected to leapfrog both later this decade.
The change in positions primarily reflected the sharp fall in the yen against the dollar, analysts said at the time.
In January, the Bank of Japan (BOJ) raised interest rates again – having done so last March for the first time in 17 years – and signaled more hikes to come.
The move, which left borrowing costs at the highest since 2008, was also underpinned by “steadily” rising wages and financial markets being “stable on the whole,” the bank said.
Even as other central banks raised borrowing costs in recent years, the BOJ has remained an outlier.
But it finally lifted rates above zero in March, signaling a move away from policies designed to counter Japan’s “lost decades” of economic stagnation and static or falling prices.
Capital Economics said in a note on Monday that “even though the jump in Q4 GDP wasn’t broad-based, it supports our view that the Bank of Japan will tighten policy more aggressively this year than most anticipate.”
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