Japan’s economy posted its longest continuous expansion since the 1980s boom as fourth quarter growth was boosted by consumer spending, moving Prime Minister Shinzo Abe’s revival plan a step closer to vanquishing decades of stagnation.
The long run of growth is an encouraging sign for the Bank of Japan, hinting that the economy may at last be building up momentum to lift consumer prices toward its 2% inflation target, Reuters reported.
The economy expanded at a 0.5% annualized rate in October-December, less than the median estimate for annualized growth of 0.9%, cabinet office data showed on Wednesday. That followed a revised 2.2% annualized increase in July-September.
Japan’s economy grew a real 1.6% in calendar 2017, the fastest increase since a 2% expansion in 2013.
An extended run of growth could lead to some speculation that the Bank of Japan can afford to scale back quantitative easing, but economists say it is unlikely as long as the yen is rising and Japan’s consumer prices remain subdued.
Financial markets are already on edge from worries that central banks in the United States and Europe will raise interest rates faster than expected to stay ahead of inflation, but the BoJ is expected to lag well behind those peers.
“Economic fundamentals look good and growth this year is likely to be above the economy’s potential,” said Hiroaki Muto, economist at Tokai Tokyo Research Center.
“However, I don’t see any talk of an exit for the BoJ when the yen is rising like this. When financial markets are volatile this hurts Japan’s animal spirits,” he said, referring to investor and consumer confidence.
