Japan’s economy defied expectations with stronger-than-anticipated annualized GDP growth of 2.8% in Q4 2024, fueled by a 4.3% surge in exports and steady consumer activity. Preliminary Cabinet Office data reveals the world’s fourth-largest economy expanded 0.7% quarterly, marking its third consecutive quarter of growth despite global headwinds.
Key drivers included:
- Export growth hitting highest level since 2022
- Capital investments rising 0.5%
- Private consumption maintaining 0.5% annual growth
The Nikkei 225 rallied on the news as analysts debated implications for monetary policy. Market strategist Yeap Jun Rong noted:
‘This growth tightrope walk – strong exports versus cooling consumption – puts the Bank of Japan in a complex position. March’s policy meeting could pivot on wage trends and inflation control.’
Inflation reached the Bank of Japan’s 2% target in December, prompting last month’s rate hike to 0.5%. While prices pressure household budgets, real wage increases (+1.6% YoY) suggest consumers may adapt to new economic conditions. Economists warn Japan’s fragile escape from decades of deflation remains dollar-sensitive, particularly with potential U.S. tariff changes.
With export growth concentrated in automotive and semiconductor sectors, manufacturers now face pressure to sustain momentum. The Cabinet Office’s 0.1% full-year GDP expansion – though modest – confirms Japan’s slow-motion recovery continues. All eyes now turn to spring wage negotiations that could determine whether consumer spending rebounds or remains Japan’s economic Achilles’ heel.
