Japan’s economy rebounds on solid spending

Japan's economy rebounded in the final three months of 2021 as falling coronavirus cases helped prop up consumption, though rising raw material costs and a spike in new Omicron variant infections cloud the outlook.

Bank of Japan Governor Haruhiko Kuroda also highlighted escalating tensions in Ukraine as a fresh risk to the central bank's forecast for a moderate economic recovery.

The world's third-largest economy expanded an annualised 5.4 per ent in October-December after contracting a revised 2.7 per cent in the previous quarter, government data showed on Tuesday, falling short of a median market forecast for a 5.8 per cent gain.

Some analysts expect the economy to slump again in the current quarter as rising Covid-19 cases keep households from shopping and supply chain disruptions hit factory output.

"The economy will likely stall in January-March or it could even contract, depending on how the Omicron variant affects service-sector consumption," said Takeshi Minami, chief economist at Norinchukin Research Institute.

Economic growth was driven largely by a 2.7 per cent quarter-on-quarter rise in private consumption, which accounts for more than half of Japan's gross domestic product (GDP).

The expansion in consumer spending, which was bigger than market forecasts for a 2.2 per cent gain, came after Japan ended coronavirus curbs in October.