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(Bloomberg) — 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 added incentive to hold policy settings steady when authorities gather next week.
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Gross domestic product grew at an annualized pace of 2.2% in the final three months of last year from the previous quarter, the Cabinet Office reported Tuesday. The result came in lower than the preliminary estimate of 2.8% as inventories sank more than forecast and consumption came in weaker. Economists had expected the revision to be largely unchanged.
The yen briefly weakened to 147.10 against the dollar following the release, before fluctuating again following overnight global market falls.
Separate figures showed households spent much less than expected in January as the impact of elevated inflation continues to bite.
The revised GDP 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 dialing back easy monetary settings with gradual rate hikes. The BOJ will deliver its next policy decision on March 19.
“Consumer spending is likely to stay weak into this quarter as households face inflation,” said Taro Saito, the head of economic research at NLI Research Institute. Still, “this data alone probably won’t alter the BOJ’s view that there’s a moderate economic recovery underway. The central bank will remain on the course of gradual normalization.”
A majority of economists surveyed in January expected the BOJ to raise its benchmark interest rate in July. BOJ Deputy Governor Shinichi Uchida signaled last week that the benchmark interest rate remains on a gradual upward path.
As in the initial estimate, net trade and business spending led the expansion, while private consumption was flat. That underscores the fragility of Japan’s economic growth, given the growing risks from US President Donald Trump’s tariffs policy. Net exports last quarter also grew mainly on the back of falling imports, another reason not to be too optimistic about the state of trade.
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