TOKYO (Reuters) – Japan’s economy avoided a recession, but its fourth-quarter rebound was much weaker than expected. This is due to the slump in corporate investment.
Uncertainty over the global economic outlook will weigh on Japan’s slow recovery from the scars of the COVID-19 pandemic, analysts say, as private consumption holds up against headwinds from rising costs of living.
China, the world’s third-largest economy, expanded at an annualized rate of 0.6% in the fourth quarter of last year, down from a revised 1.0% for July-September, government data showed on Tuesday. I showed that.
Gross domestic product (GDP) growth was much smaller than the median market forecast of a 2.0% increase due to lower capital spending and inventories.
Toru Suehiro, chief economist at Daiwa Securities, said, “The recovery from the negative growth in July-September is not very impressive.
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“Consumption can be expected to pick up as service spending stabilizes. However, it is difficult to predict a strong recovery, partly under pressure from rising inflation,” he said.
Bank of Japan Policy Challenge
Weak data highlights the delicate task at hand Kazuo UedaThe government’s nominee to be the next governor of the Bank of Japan, he is seeking ways to normalize the bank’s ultra-loose policy without derailing a fragile economic recovery.
Policy makers hope the recovery in consumption driven by savings accumulated during the pandemic will last long enough for wages to recover and soften the hit to households from rising food and fuel costs. increase.
With inflation above the Bank of Japan’s 2% target, the outlook for the economy and wages will be key to when the central bank can phase out its massive stimulus package.
“It may be difficult for the BOJ to normalize its ultra-loose policy this year because overseas economies are slowing,” said Tsuyoshi Nan, chief economist at The Norinchukin Bank Research Institute.
“BoJ may have to wait until 2024 at the earliest.”
Data showed that private consumption rose 0.5% and external demand added 0.3 percentage points to growth, while business fixed investment weighed on the economy, down 0.5% more than expected.
Private sector inventories also fell 0.5 percentage points below growth as corporate inventories of automobiles and raw materials fell.
recession risk
For the full year, the economy expanded by 1.1% compared to a 2.1% increase in 2021, data showed.
Japan has seen an uptick in international visitors since some of the world’s toughest border controls to prevent the spread of the COVID-19 pandemic ended in October.
Economy Minister Shigeyuki Goto told reporters that the effects of the pandemic had faded and the economy was on the road to recovery.
“Higher inflation and a global slowdown are risks,” he said after the data was released. “But business spending has not cooled … we are not too pessimistic about the outlook,” he said.
But some analysts warn that global headwinds could weigh on export-dependent economies and deter manufacturers from raising wages, derailing a fragile recovery.
“Net trade has pushed Japan into the economy in the first half, especially as business fixed investment weakens faster than expected at a time when other advanced economies are headed for recession,” said Darren Tay, Japan economist at Capital Economics. I expect it will drag us back,” he said.
Reported by Reika Kihara and Tetsushi Kajimoto. Additional report by Hidemi Yamamitsu. Edited by Shri Navaratnam
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