In Japan, economic activity surprised in the fourth quarter of 2024, jumping 0.7% compared to the previous three months.
This performance can be explained by a rebound in business investment (+0.5%) and a boom in exports (+1.1%) at the end of the year, parallel with a sharp decline in imports (-2.1%).
However, we should not be too quick to celebrate. These preliminary figures are often revised sharply afterwards, and an unpleasant surprise in the coming weeks cannot be ruled out.
Public spending contributed to GDP’s increase
In any case, despite the strong growth of the last quarter, Japan posted a GDP increase of only 0.1% for 2024, compared to 1.5% in 2023 and 0.9% in 2022. Last year's Japanese growth was the weakest since 2020 when COVID-19 caused a global recession.
In addition, the small GDP growth in 2024 owes a lot to the increase in public spending (+0.5% after +0.1% in 2023). A jump that will be difficult to repeat sustainably with the rise in interest rates.
The 10-year yield is now at more than 1.40% compared to less than 0.80% a year ago, and it will continue to rise with the ongoing tightening of monetary policy.
Waiting for US tariffs’ impact
Finally, the Japanese economy, which is still very dependent on exports, will not emerge from the trade war unscathed. The United States is the leading destination for Japanese exports, accounting for a fifth of the total. The United States has a huge trade deficit with Japan, which is already in Trump's sights.
Japan's economic prospects are too weak to invest in. Don't buy Japanese stocks.