Japan’s Growth Rate Hits 1.1% Last Year, "Overtaking South Korea for the First Time in 27 Years"

Japan’s real gross domestic product (GDP) growth rate came in at 1.1% last year. It is the first time in 27 years, since 1998, that Japan’s GDP growth has outpaced South Korea’s, which recorded 1.0%.
According to the flash GDP estimate released by the Japanese government on the 16th, Japan’s real GDP grew 1.1% last year. This is the highest rate in three years. Japan’s economic growth had slowed from 3.6% in 2021 to 1.3% in 2022, 0.7% in 2023, and −0.2% in 2024, but it rebounded last year. Nominal GDP reached 662.8 trillion yen (about 6,253 trillion won), up 4.5% from the previous year.
Japan’s growth rate had also exceeded South Korea’s in the flash estimate for 2023, only to fall behind again in the final figures. For that reason, observers note that it will be necessary to watch whether the latest numbers change when revised growth data are released.
The Bank of Korea (BOK) recently announced that South Korea’s real GDP growth rate in the previous year, based on a flash estimate, was 1.0%. For the first time in 27 years, since South Korea’s economy contracted 4.9% during the 1998 foreign exchange crisis, Japan’s growth rate has surpassed South Korea’s.
Major global institutions expect South Korea’s growth rate to overtake Japan’s again next year. In an economic outlook report released last December, the Organisation for Economic Co-operation and Development (OECD) projected that Japan’s economic growth would slow from 1.1% last year to 0.5% next year, while South Korea’s would rise from 1.0% to 2.2%. Looking at Japan’s quarterly real GDP growth rates last year (quarter-on-quarter, seasonally adjusted), the economy expanded 0.3% in the first quarter and 0.5% in the second, then contracted 0.7% in the third quarter. It rebounded 0.1% in the fourth quarter.
Reuters commented, "The latest GDP figures suggest that the drag on Japan’s economy from U.S. tariffs is gradually easing," adding that they "offer cautious confidence to the Bank of Japan, which has signaled a shift toward interest rate hikes as part of monetary policy normalization." However, it also noted that "the data fall well short of the market’s average forecast for 1.7% growth."
Investors in Japan’s stock market are reportedly disappointed by the fourth-quarter GDP numbers. Nikkei reported, "Although GDP growth turned positive in the fourth quarter for the first time in two quarters, it fell far short of market expectations and is having little impact on the market." According to Nikkei, the Nikkei 225 index on the Tokyo Stock Exchange was trading at 56,914.29 as of 10:21 a.m., down 0.05% from the previous session.

mj@fnnews.com Park Moon-su Reporter