---
title: "Consumption slows but the economy remains stable. Does the Bank of Japan have strong confidence to raise interest rates?"
type: "News"
locale: "zh-CN"
url: "https://longbridge.com/zh-CN/news/228498569.md"
description: "Japan's economic performance exceeded expectations, with corporate spending and net trade driving growth for the third consecutive quarter. The Bank of Japan is expected to continue its interest rate hike plan. The annualized GDP growth rate for the fourth quarter of last year was 2.8%, higher than expected. Although private consumption saw a slight increase, it significantly slowed compared to the previous quarter and remained below levels from a decade ago. Economists believe that despite the slowdown in consumption, the overall economy is still growing, and the central bank may continue to raise interest rates. The yen strengthened accordingly, and Prime Minister Shigeru Ishiba plans to address inflation through price subsidies"
datetime: "2025-02-17T03:10:04.000Z"
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  - [zh-CN](https://longbridge.com/zh-CN/news/228498569.md)
  - [en](https://longbridge.com/en/news/228498569.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/228498569.md)
---

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# Consumption slows but the economy remains stable. Does the Bank of Japan have strong confidence to raise interest rates?

Zhitong Finance APP learned that Japan's economic performance exceeded expectations, with corporate spending and net trade driving growth for the third consecutive quarter, which is likely to enable the Bank of Japan to continue its interest rate hike plans.

Data released by the Cabinet Office of Japan on Monday showed that the annualized quarter-on-quarter growth rate of Gross Domestic Product (GDP) in the fourth quarter of last year was 2.8%, higher than the revised 1.7% in the previous quarter and significantly above the market consensus expectation of 1.1%.

![image.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250217/1739761499470210.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

Although the data indicates that the Japanese economy continues to grow steadily, the report also reveals some weaknesses. The growth in net exports is partly due to a decline in imports, raising concerns about the health of domestic demand.

Private consumption saw a slight increase this quarter, exceeding expectations, but it clearly slowed down compared to the previous quarter. On an annual basis, the value of private consumption in 2024 is below the levels of a decade ago.

Nevertheless, this data may bolster the confidence of central bank officials, allowing them to continue seeking opportunities to gradually unwind the ultra-loose monetary policy through interest rate hikes.

"Personal consumption has significantly slowed down, and inflation is also putting pressure on consumption due to weak real wage growth," said Yuichi Kodama, an economist at Meiji Institute. "However, overall, the economy is still growing, so the Bank of Japan may continue its pace of interest rate hikes."

Taro Kimura, a senior Japanese economist at Bloomberg Economics, stated: "Increased investment and resilient consumption indicate that the Bank of Japan's interest rate hikes have not significantly impacted the private sector."

Japan's GDP data will be revised in March, just about a week before the Bank of Japan's next meeting to decide on policy. Economists expect that the Bank of Japan will not raise interest rates again until after the summer. Following the data release, the yen strengthened.

Currently, Prime Minister Shigeru Ishiba is attempting to address the impact of inflation through a series of price subsidy measures as part of an economic stimulus plan. As Ishiba's minority government negotiates with smaller opposition parties to increase the income tax exemption and provide free high school education, more voter-friendly measures may be introduced in the new fiscal budget starting in April.

The contribution of net exports to economic growth this quarter is partly due to a decline in imports, which is in turn due to falling energy prices. Exports have moderately rebounded, benefiting from strong consumption by inbound tourists, which is classified as service exports.

Given President Trump's threats to impose tariffs on trade partners, Japan's trade outlook is increasingly uncertain, and Ishiba needs to rely on his economic plan to support growth in the coming months. The Japanese government is trying to clarify the details of Trump's reciprocal tariff measures while seeking new tariff exemptions on steel and aluminum.

Kazuki Fujimoto, an economist at the Japan Research Institute, stated: "The outlook for goods exports is unclear, but service exports, especially inbound demand, may continue to grow, although the growth rate may slow to some extent. Overall, I believe exports are moving in a positive direction." Strong fourth-quarter data brought the full-year economic growth rate for 2024 to 0.1%, exceeding market expectations of contraction. Nominal GDP has surpassed 600 trillion yen for the first time, marking the achievement of the target set nearly a decade ago by former Prime Minister Shinzo Abe.

Nevertheless, this year's growth rate is still the smallest increase since the pandemic.

The weak yen has reduced the value of Japanese goods and services in dollar terms, weakening Japan's position in the global economy. Japan is now the fourth-largest economy after the United States, China, and Germany. Economists expect India to surpass Japan in the coming years. Last year, the yen depreciated by more than 10% against the dollar, and despite multiple interventions by Japanese authorities in the foreign exchange market to support the yen's exchange rate, the situation has not improved

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