TOKYO – Japan's economy continued its modest recovery in the fourth quarter of 2024, with annualized growth of 2.8% in real terms, according to a preliminary report released by the Cabinet Office on Monday. This marks the third consecutive quarter of expansion, driven primarily by a resurgence in corporate capital spending.

However, despite the positive fourth-quarter performance, the overall economic growth for the entire year of 2024 was nearly flat, registering a meager 0.1% increase compared to the previous year. Nominal GDP, however, saw a more robust growth of 2.9%, reaching ¥609,288.7 billion and surpassing ¥600 trillion for the first time on a full-year basis.

The fourth-quarter growth was fueled by a 0.5% expansion in corporate capital spending, indicating renewed business confidence. Private consumption, which accounts for a significant portion of Japan's economy, also saw a slight uptick of 0.1%, continuing its gradual recovery for the third straight quarter. Housing investment also edged up by 0.1%. However, public investment acted as a slight drag on growth, declining by 0.3%.

Trade figures showed a positive contribution to the overall GDP growth. Exports increased by 1.1%, while imports decreased by 2.1%.

Looking at the contributions to GDP growth, domestic demand had a slightly negative impact of 0.1 percentage point on the quarter-to-quarter growth rate of 0.7%. External demand, on the other hand, made a substantial positive contribution of 0.7 percentage point.

While the fourth-quarter growth offers some encouraging signs, the near-zero growth for the year underscores the challenges Japan's economy continues to face. The government will be closely monitoring upcoming economic data to assess the sustainability of the current recovery and consider appropriate policy measures to bolster growth in the coming year.

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