BOJ edges closer to hiking rate as Japan escapes recession

Weak spending data will not deter central bank from making a move, says economist

Japan's economy avoided falling into a recession at the end of 2023, helped by robust spending by businesses, an outcome that improves the optics for the central bank as it mulls the timing of its first interest rate hike since 2007.

Gross domestic product expanded at an annualised pace of 0.4 per cent in the final three months of 2023, the Cabinet Office reported on March 11, reversing a 0.4 per cent retreat initially reported.

While the upwardly revised data pointed to more resilience in the economy than initially thought ahead of next week's Bank of Japan (BOJ) policy meeting, the figures also showed that consumers were continuing to spend less in real terms as inflation weighed.

Economists had forecast that the updated report would show 1.1 per cent growth.

The yen and bond yields rose on notions that the BOJ is edging closer to ending the world's last negative interest rate, with market expectations ramping up for a move as early as March.

March Il's data supports BOJ's view that the economy continues to recover moderately, with companies optimistic enough to bump up investment and workers' pay. Corporate capital investment was revised to a 2 per cent advance, powering growth in the last quarter. Consumer spending, on the other hand, was revised to show a slightly deeper decline at 0.3 per cent.