Economic Rebound with a 0.3% Growth Rate
Japan’s economy recorded a modest rebound in the third quarter, marking a 0.3% year-on-year growth in its gross domestic product (GDP). This growth comes as a positive shift after two consecutive quarters of contraction, reflecting a revised 1.1% decline in the previous quarter, according to government data released on Friday. The economy’s performance comes at a crucial time for Japan as it navigates through policy adjustments, including recent interest rate hikes by the Bank of Japan (BOJ).
In July, the BOJ raised interest rates from 0.1% to 0.25%—its highest level since 2008—stirring concerns about economic cooling, as higher rates typically slow down economic activity. However, this quarter’s data indicate a slight, encouraging expansion that could support the BOJ’s plans to continue adjusting rates if economic conditions meet expectations.
Quarterly Growth and Future Rate Projections
On a quarter-on-quarter basis, Japan’s GDP rose by 0.2%, aligning with Reuters poll estimates though lower than the 0.5% growth observed in the previous quarter. Annually, The Japan’s economy expanded by 0.9%, exceeding the expected 0.7% but falling short of the 2.9% annualized growth seen in the prior quarter. The data reflect a mixed economic outlook, with signs of recovery tempered by fluctuations in growth rates. Analysts expect that if economic indicators stabilize, the BOJ could potentially raise rates further, with projections suggesting a possible increase to 1% by the latter half of its fiscal year beginning in September 2025. While the economy showed some resilience, the Bank’s potential rate increases may hinge on sustained growth and price stability.
Market Reactions and Yen Volatility
Following the release of the GDP data, Japan’s stock market reacted positively. The Nikkei 225 index rose by 1.28%, while the Topix index gained 0.96%. Meanwhile, the Japanese yen weakened by 0.29% against the U.S. dollar, trading at 156.71. The yen’s volatility in the third quarter, partly due to fluctuating economic data and speculation, has led Japanese finance officials to issue warnings against excessive currency speculation.
The government has even intervened to stabilize the yen amid wild market swings. Economists have noted that capital spending remains weak and consumption recovery sluggish. In recent comments, Prime Minister Shigeru Ishiba indicated a cautious stance on further rate increases, stating that the current environment might not necessitate additional hikes, contrasting his earlier support for the BOJ’s policy direction to normalize rates.
