Japan's Economy Struggles Amid Inflation and Weak Yen

Japan's economy barely grew in the fourth quarter, challenging PM Sanae Takaichi's recovery efforts amid inflation and a weak yen. The GDP rose just 0.2% annually, defying expectations. Takaichi may suspend the consumption tax to boost growth, as investment and exports struggle.

Japan's economy inching towards growth in the fourth quarter significantly underperformed market forecasts, posing a key test for Prime Minister Sanae Takaichi's government. With cost-of-living pressures affecting confidence and domestic demand, the administration is strategizing increased investment to bolster consumption and rejuvenate economic growth.

The recent GDP data underscores the hurdles policymakers face, particularly as the Bank of Japan maintains its commitment to elevate interest rates, aiming to shift from prolonged ultra-low borrowing costs amid ongoing inflation and a weak yen. Economic experts acknowledge PM Takaichi's fiscal policy strategy as visionary.

Despite the world's fourth-largest economy showing a mere 0.2% annualized growth in the October-December period, far shy of forecasts for a 1.6% rise, hopes for economic rebound remain faint. Consumption, capital expenditure, and exports were weaker than anticipated, leading to heightened investor vigilance on Takaichi's campaign promise to potentially suspend the consumption tax.