Revised data released by the Japanese government on Tuesday indicated that the annualized quarter-on-quarter growth rate of the GDP for the fourth quarter of 2024 was 2.2%, down from the previously announced initial value of 2.8%. This adjustment was mainly due to weaker consumer spending and a larger-than-expected decline in inventories, indicating slightly insufficient momentum in Japan's economic growth. Economists originally expected no significant revisions, but the final result still came in below expectations.
Signs of Economic Slowdown Strengthen, Market Reaction Cautious
Following the data release, the yen's gains against the dollar narrowed, quoting at 147.01, after having risen to 146.78, a 0.3% increase during the day. Additionally, Japan's January household spending data was weaker than market expectations. Inflation-adjusted spending grew 0.8% year-on-year, indicating that consumer confidence remains fragile, not providing enough momentum to support economic recovery.
Although the overall economy continues to expand moderately, the downward revision in GDP data highlights vulnerabilities within Japan's economy. In particular, a slowdown in household consumption may lead the Bank of Japan to adopt a more cautious approach in future monetary policy adjustments. The market is closely watching the Bank of Japan's policy decision due on March 19th. Analysts suggest that in light of signals of slowing economic growth, the central bank is likely to maintain the current accommodative policy, delaying further rate hikes to ensure economic stability.
