Japan’s Q4 GDP Growth Revised Down Amid Weak Consumer Spending

Japan’s economy expanded at a slower pace in Q4 2024 than initially estimated, as sluggish consumer spending offset gains in exports and capital expenditure. Government data released Tuesday showed GDP grew 2.2% year-on-year, down from the previous estimate of 2.8%, but still higher than Q3’s 1.2% growth.

On a quarterly basis, GDP growth was revised to 0.6% from 0.7%, outpacing Q3’s 0.3%. The downward revision was driven by flat private consumption, revised from an initial 0.1% growth, and marking a sharp slowdown from Q3’s 0.7% increase. Meanwhile, capital expenditures saw a slight upward revision to 0.6%, and exports held steady at 0.7% quarter-on-quarter.

The Q4 GDP price index was also revised higher to 2.9% from 2.8% year-on-year, indicating stronger-than-expected inflation. Consumer spending, a key driver of Japan’s 2024 economic growth, cooled as inflation pressured household finances.

January data showed a steeper-than-expected drop in household spending, signaling potential weakness in Q1 growth. However, upcoming spring wage negotiations are expected to support earnings and boost private spending.

Despite the slowdown, Japan’s economy remains resilient, giving the Bank of Japan more room to continue its rate hikes. Following a 25 basis point increase in January, the BOJ is expected to hold rates steady next week. However, if wage growth remains strong, another rate hike could come as early as May.

As inflation stays sticky and the economy maintains growth, Japan’s monetary policy outlook remains in focus. Investors will be watching closely for signals from the BOJ on future rate moves.