TOKYO- Japan’s economy grew faster than expected in the fourth quarter, on improved business spending and a surprise increase in consumption and shoring up the central bank’s case for more interest rate hikes.
Gross domestic product expanded 2.8 percent annualized in the October-December quarter, preliminary data showed on Monday, beating a median market estimate of a 1.0 percent gain in a Reuters poll.
The upbeat data helped lift Tokyo’s Nikkei stock benchmark and the yen
But while the data showed some bright spots for the world’s fourth-largest economy, analysts said that the headline figure was flattered partly by a fall in imports, which improved net trade, as well as year-end bonuses.
“Details of the results indicate that the economy was not as strong as the headline number suggests,” Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, said.
The annualized increase in GDP follows a revised 1.7 percent growth in the previous quarter and translates into a quarterly rise of 0.7 percent, also better than the median estimate for a 0.3 percent uptick.
Private consumption, which accounts for more than half of economic output, rose 0.1 percent, beating a market estimate of a 0.3 percent fall but cooling from the 0.7 percent rise of the previous quarter.
Meiji Yasuda’s Maeda said consumption was boosted by high year-end bonuses, but it may slip again in January onwards when the bonus impact dissipates.
“The underlying trend remains weak amid rising prices of food,” he said.
Capital spending, a key driver of private demand-led growth, rose 0.5 percent in the fourth quarter, missing a market estimate for a rise of 1.0 percent but reversing a decline in the previous quarter.
Capex remains a volatile component of the GDP series and has in the past been subject to large revisions that can affect headline numbers. The government releases revised December quarter GDP data on March 11.
Net external demand, or exports minus imports, contributed 0.7 of a percentage point to growth, reversing a negative contribution in the July-September period.
The decline in imports may have reflected lacklustre domestic demand, analysts said.
Japan’s Economy Minister Ryosei Akazawa said in a statement that a gradual recovery in the economy is expected to continue.
“But it is necessary to be mindful of the impact of continued price rises for food and other daily items on consumer spending through the downward pressure on consumer sentiment,” he added.
