Japan's economy shows stronger resilience as the central bank considers the timing of interest rate hikes

According to the Zhitong Finance APP, Japan's economic growth rate is faster than initially expected, indicating a stronger economic recovery, while the Bank of Japan will analyze the data before making a policy decision later this month. The Cabinet Office of Japan released revised data for the third quarter GDP, showing an annualized growth rate of 1.2%, exceeding the preliminary estimate of 0.9%, mainly due to improvements in net exports, capital expenditures, and inventory data. Economists had previously predicted an upward adjustment to 1.0%.

Stronger economic growth data supports the Bank of Japan's view that the economy will continue to expand moderately. The declines in net exports and capital expenditures have narrowed, while the increase in inventories has also been revised upward.

Bank of Japan Governor Kazuo Ueda is expected to carefully study economic data, including the Tankan survey, on December 13 before the central bank's policy decision on December 19. In a recent interview with the Nikkei, Ueda stated that the timing for interest rate hikes is "approaching," intensifying speculation that the Bank of Japan may raise rates this month.

Yuichi Kodama, an economist at the Meiji Yasuda Research Institute, stated, "Today's report reaffirms that the economy continues to recover moderately," adding that "the likelihood of the Bank of Japan raising rates again in December is over 50%. However, due to the recent slight appreciation of the yen, there is no need to rush, and they may choose to wait until January."

Bloomberg economist Taro Kimura said, "Overall, we believe the Bank of Japan will use the GDP report as further evidence that the Japanese economy is becoming strong enough to withstand further reductions in stimulus."

Data released on Monday confirmed that the U.S. economy has achieved growth for the second consecutive quarter. Despite facing a strong typhoon in August, consumer spending remained relatively robust for the second quarter in a row, indicating that the economy may be regaining fundamental momentum.

However, some economists are skeptical about the sustainability of Japan's economic growth, as it has been partly boosted by a one-time tax cut ordered by former Prime Minister Fumio Kishida. Other consumption data, including household spending, continue to show that consumers are far from optimistic, as they manage their wallets considering ongoing inflation factors.

Inflation has remained at or above the Bank of Japan's target level for more than 30 months.

A Bloomberg survey last month indicated that Japan's annualized growth rate for the fourth quarter is expected to reach 1.5% so far.

The government led by Prime Minister Shigeru Ishiba remains cautious about the economic situation. The government has yet to announce an exit from deflation and continues to opt for ample fiscal support to mitigate the impact of inflation on the public, as evidenced by the latest economic stimulus plan, which is slightly larger than last year's The Japanese economy is still susceptible to uncertainties from major trading partners. In the United States, President-elect Donald Trump has promised to impose higher tariffs on all imported goods. In China, authorities are trying to boost economic growth through aggressive stimulus measures. Trump's return to the White House could also lead to disruptions in global supply chains and suppress global demand.

Currently, the revised GDP data is generally in line with recent economic data, including inflation, and is consistent with the Bank of Japan's forecasts. Kodama from Meiji Yasuda stated, "I believe the Bank of Japan will continue to view the situation as developing normally."