Japan’s economy registered a 0.3% year-on-year GDP growth in the third quarter, breaking a two-quarter streak of declines, as per government data released Friday.
This improvement reverses the revised 1.1% drop recorded in the second quarter.
The growth comes after the Bank of Japan raised interest rates to 0.25% in July, marking the highest level since 2008.
While higher rates typically cool down economic activity, the Bank has indicated that further hikes are possible “if economic activity and prices develop as expected.”
On a quarter-on-quarter basis, GDP rose by 0.2%, aligning with estimates, though below the previous quarter’s 0.5% growth.
Annualized growth showed a 0.9% expansion, slightly above predictions of 0.7% but notably down from the prior quarter’s 2.9% rise.
Following the data release, the Nikkei 225 and Topix indices climbed by 1.28% and 0.96%, respectively, signaling some optimism among investors.
Meanwhile, the yen weakened by 0.29% against the U.S. dollar, trading at 156.71, continuing its volatile trend this quarter as officials issued multiple verbal warnings against “excessive speculation.”
Keio University’s Sayuri Shirai noted the data was “a little better than what everybody thought,” though she pointed out that capital spending had dipped and consumer demand remained weak.
In October, Prime Minister Shigeru Ishiba expressed doubt over the need for additional rate hikes, despite previously supporting the BOJ’s trajectory toward normalizing rates.
If business indicators continue in line with forecasts, the BOJ could raise rates to 1% by the latter half of the 2025 fiscal year, hinting at a potential shift in Japan’s economic policy landscape.
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