Japan’s fragile Q4 economic recovery poses early test for Takaichi

Economic Performance - Japan's economy showed a meager growth of 0.2% in the fourth quarter, significantly below the expected 1.6% increase, following a revised contraction of 2.6% in the previous quarter [3] - The quarterly growth rate was only 0.1%, again falling short of the median estimate of 0.4% [3] Government Response - Prime Minister Takaichi's administration plans to increase public spending to boost consumption and economic growth following a recent election victory [1] - There is a focus on suspending the consumption tax, particularly on food, as sluggish economic activity may prompt quicker fiscal measures, including a supplementary budget in the first half of the fiscal year starting in April [4][5] Market Reactions - Japanese stocks experienced a downturn following the GDP data release, while bond markets remained subdued [5] - Analysts suggest that the weak economic performance may lead to slower interest rate hikes by the Bank of Japan, as the economy struggles to gain momentum [6]