Japan Q4 GDP rises by 0.6%, falls short of consensus

Japan's economy grew more slowly than expected at the end of 2022 amid restrained household spending and business investment.

According to Japan's Cabinet Office, in seasonally adjusted terms, during the fourth quarter, the country's gross domestic product expanded at a quarterly annualised pace of 0.6% (consensus: 2.0%).

Third quarter GDP growth meanwhile was revised downwards from a prior reading of -0.8% to -1.0%.

Tourism spending boomed as Japan removed Covid-19 restrictions, driving a 0.5% quarter-on-quarter increase in private consumption after a flat outcome for the prior three-month stretch.

But high food and energy costs proved a drag on other areas of consumption.

Net exports also rebounded, rising by 0.3% during the quarter following a 0.6% decline in the third quarter, but due to falling imports.

During the third quarter, net exports had subtracted 1.1 percentage points from the rate of economic growth, the worst outcome for next exports since at least 2000, said Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics.

Business investment registered a slight drop over the three months to December with private inventories down by 0.5%.

"We think the turnaround in Japanese business investment is likely to be modest, in line with tepid global conditions," Wrigley added

"The Bank, likely under new governor Ueda from April onwards, will be data driven. The economic data are likely to remain too soft to justify a significant policy change this year."