Japan’s gross domestic product (GDP) grew at an annualized rate of 2.8 percent between October and December 2024, significantly surpassing analysts’ expectations and marking the third consecutive quarter of expansion.
According to a preliminary report released by the Cabinet Office on Monday, the country’s quarter-on-quarter, inflation-adjusted real GDP rose by 0.7 percent. This figure outperformed the median forecast of a 0.3 percent increase projected by analysts surveyed by Reuters.
A key driver of the overall GDP growth was corporate spending, which recorded a 0.5 percent increase from the previous quarter. Following the report’s release, the yen appreciated by 0.3 percent, reaching ¥151.8 per US dollar.
Although the GDP data remains subject to revision, the latest figures indicate that Japan’s economy continues to hold steady despite the disruptions caused by the Bank of Japan’s decision last year to “normalize” monetary policy and initiate a cycle of interest rate hikes.
In January, the BoJ raised interest rates to approximately 0.5 percent, the highest level in 17 years, and signaled the likelihood of further increases as inflation remains persistent.
Most economists now anticipate that the central bank will implement at least one rate hike in 2025, with many identifying the BoJ’s July meeting as the most probable timing for such a move.
Several economists, who had predicted that GDP growth would slow to an annualized rate of roughly 1 percent in the fourth quarter, expected that overall economic performance would be weighed down by weaker private consumption.
Factors such as record-high rice prices and unseasonably warm weather were projected to dampen spending on food and winter clothing.
However, private consumption—which accounts for nearly half of Japan’s economic output—unexpectedly rose by 0.1 percent in the quarter, defying most forecasts of a contraction.
The government is set to release January’s national consumer price growth data on Friday. Analysts at Goldman Sachs project that the new core index, which excludes fresh food and energy, will reflect a 2.6 percent year-on-year inflation increase, a slight acceleration from December.
Rising rice prices, which are not classified as fresh food, have started driving up the costs of rice-based products, including processed foods and restaurant meals.