Japan’s Q4 growth tests PM Takaichi

Japan's economy registered a modest annualized growth of 0.2% in the fourth quarter, falling significantly short of the anticipated 1.6% increase, according to government data. This lackluster performance poses a challenge for Prime Minister Sanae Takaichi, who recently secured a sweeping electoral victory and is now focused on boosting investment through targeted public spending in economically vital sectors. The fourth quarter's growth follows a larger contraction of 2.6% in the previous quarter, signaling a sluggish recovery. Key economic indicators, such as private consumption and capital expenditure, showed little improvement, with consumption rising only 0.1% and capital spending increasing by 0.2%. Economists suggest that the economy's ability to achieve sustainable growth hinges on positive real wage growth, emphasizing the importance of upcoming wage negotiations. Despite these challenges, projections for the first half of the year indicate a gradual expansion, although the Bank of Japan remains committed to raising interest rates to combat inflation rather than stalling growth. Overall, the recent economic data highlights the ongoing difficulties faced by Japan's policymakers in revitalizing domestic demand amid persistent cost-of-living pressures.