Japan's Economic Surge: An Insightful Look into Q4 Growth

Japan's economy grew by 2.8% in the October-December quarter, driven by robust domestic demand and surprise gains in consumer spending. Improved business investment and decreased imports contributed positively, though rising food prices pose a threat to continued growth.

Japan's economy expanded by an annualized 2.8% during the October-December quarter, as revealed by government data on Monday. This growth was largely attributed to enhanced business spending and surprisingly robust consumer consumption, which exceeded expectations.

Despite trade uncertainties spurred by U.S. tariff threats, strong domestic demand buttressed the recovery of the world's fourth-largest economy. This positive performance aligns with the Bank of Japan's strategy to sustain interest rate hikes and normalize monetary policy.

The growth surpassed the 1.0% increase projected by a Reuters poll and builds on the revised 1.7% growth from the previous quarter. Key contributors included an unexpected rise in private consumption and strategic adjustments in net trade figures, driven by a reduction in imports.

(With inputs from agencies.)