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

By Makiko Yamazaki and Chang-Ran Kim

TOKYO, Feb 16 (Reuters) - Japan's system limped backmost to meagre maturation successful the 4th quarter, importantly missing marketplace expectations successful a cardinal trial for Prime Minister Sanae Takaichi's authorities arsenic cost-of-living pressures resistance connected assurance and home demand.

Fresh disconnected a sweeping predetermination victory, Takaichi's medication is preparing to ramp up concern ‌through targeted nationalist spending to enactment up depletion and revitalise economical growth.

Monday's information brings crisp absorption to the situation astatine manus for policymakers astatine a clip erstwhile the Bank of ‌Japan has reiterated its pledge to support raising involvement rates and normalise monetary settings from years of ultra-low borrowing costs amid persistent ostentation and a anemic yen.

"PM Takaichi's efforts to reflate the system via looser fiscal argumentation look prescient," said Marcel ​Thieliant, caput of Asia-Pacific astatine Capital Economics.

Gross home merchandise successful the world's fourth-largest system accrued an annualised 0.2% successful the October-December quarter, authorities information showed, good abbreviated of a median estimation of a 1.6% summation successful a Reuters poll. It hardly scraped backmost to maturation from a larger revised 2.6% contraction successful the erstwhile quarter.

The speechmaking translates into a quarterly emergence of 0.1%, besides weaker than the median estimation of a 0.4% uptick.

"It shows that the economy's betterment momentum is not precise strong," Meiji Yasuda Research Institute economist Kazutaka Maeda said. "Consumption, superior expenditure and exports - areas we hoped would thrust the system - conscionable haven't been arsenic beardown arsenic ‌we expected."

The amazingly brushed momentum volition support investors connected alert for Takaichi's ⁠campaign pledge to suspend a depletion tax, an contented that sparked turmoil successful Japanese markets disquieted astir fiscal slippage successful a federation with the heaviest indebtedness load successful the developed world.

"In fact, sluggish economical enactment increases the chances that Takaichi volition not lone property up with suspending the income taxation connected nutrient ⁠but enact a supplementary fund during the archetypal fractional of the fiscal twelvemonth that starts successful April already alternatively than hold until the extremity of this year," Capital Economics' Thieliant said.

Japanese stocks stuttered successful the aftermath of the GDP data, portion bonds were subdued.

SLOWER RATE HIKES?

Analysts task Japan volition proceed to grow astatine a gradual gait this year, though the 4th quarter's anemic result suggests the system mightiness conflict to occurrence connected each cylinders.