Japan’s economic growth revised lower ahead of Bank of Japan meet
The BOJ will deliver its next policy decision on Mar 19
[TOKYO] Japan’s economy expanded in the last quarter of 2024 at a slower pace than reported in preliminary data, a result that may give the Bank of Japan (BOJ) an added incentive to hold policy settings steady when authorities gather next week.
Gross domestic product grew at an annualised pace of 2.2 per cent in the final three months of last year from the previous quarter, the Cabinet Office reported on Tuesday (Mar 11). The result came in lower than the preliminary estimate of 2.8 per cent as consumption came in weaker and inventories sank more than forecast. Economists had expected the revision to be largely unchanged.
The yen weakened to as much as 147.10 against the US dollar following the release, after trading around 146.87 shortly before the figures came out.
Separately, households spent less than expected in January. Outlays adjusted for inflation rose 0.8 per cent from a year earlier, the Ministry of Internal Affairs reported on Tuesday.
The revised figures highlight pockets of weakness in the Japanese economy even as it continues to expand moderately overall. A slowdown in spending by households may prompt the central bank to be more cautious as it looks for opportunities to keep dialling back easy monetary settings with gradual rate hikes. The BOJ will deliver its next policy decision on Mar 19.
As in the initial estimate, net trade and business spending led the expansion while private consumption was flat. Net exports grew mainly on the back of falling imports.
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A majority of economists surveyed in January expect the BOJ to raise its benchmark interest rate in July. BOJ deputy governor Shinichi Uchida signalled last week that the benchmark interest rate remains on a gradual upward path.
At the same time, fairly solid economic data of late along with the yen’s persistent weakness, rising food prices and prospects of strong wage hikes have prompted some economists to cite the risk that the BOJ may hike earlier than expected.
The latest monthly wage report showed base pay rose in January at the fastest clip in 32 years. Annual wage negotiations between unions and employers are set to culminate later this week with the initial results of this year’s deals.
Going forward, the pace of economic growth is expected to slow, according to analysts surveyed by Bloomberg. On the domestic front, one key point is whether consumer spending, the biggest component of GDP, can keep expanding as households try to cope with rising costs of living. BLOOMBERG
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