Japan revises fourth-quarter GDP lower, complicating BOJ’s interest rate outlook

Japan’s financial development slowed to 2.2% on an annualized foundation within the fourth quarter, complicating the central financial institution’s case for an additional interest rate hike within the close to time period.

The revised information got here in decrease than economists’ median forecast and the preliminary estimate of two.8% development.

On a quarter-to-quarter foundation, GDP expanded 0.6%, in contrast with a 0.7% development in preliminary information launched final month, the Cupboard Workplace’s revised information confirmed on Tuesday.

The Financial institution of Japan is prone to maintain coverage rate regular at its subsequent coverage assembly on March 18-19, Reuters reported. But the rate-setting board may very well be discussing one other rate hike for as quickly as Might, resulting from considerations about inflationary strain from wage good points and cussed rises in meals prices.

Japanese Prime Minister Shigeru Ishiba stated on Monday that the central financial institution was near attaining its 2% inflation goal. “The Financial institution of Japan is taking varied steps to realize secure costs,” he stated.

Because the central financial institution sought to normalize its ultra-loose financial coverage final yr, it has raised short-term interest charges by 1 / 4 proportion to 0.5% in January — its highest stage for the reason that depth of world monetary disaster in 2008.

Financial institution of Japan Governor Kazuo Ueda and different members of the rate-setting board have signaled additional rate hikes if inflation strikes durably towards its 2% inflation goal.

The nation’s 10-year authorities bond yields just lately surged to its highest stage since October 2008, amid sustained inflation within the nation, a world sell-off in bonds, in addition to central financial institution feedback that it’s going to proceed to taper Japanese authorities bond purchases.

Japan’s headline inflation has stayed above the BOJ’s 2% goal for 34 straight months, with the newest determine in January hitting a two-year excessive of 4%.

The so referred to as “core-core” inflation rate, which strips out costs of each recent meals and vitality and is intently monitored by the BOJ, climbed barely to 2.5% in January, hitting its highest rate since March 2024.

Individually, the BOJ is slated to launch the company items value index for January on Wednesday, which measures costs of products firms cost one another. The gauge is anticipated to point out a 0.1% month-on-month decline, in keeping with a Reuters ballot, whereas leaping 4.0% from a yr earlier.

— CNBC’s Lim Hui Jie contributed to this report.