Japan’s nominal GDP grew by 2.9% in 2024

The preliminary value of gross domestic product (GDP) in 2024 released by the Cabinet Office on the 17th showed that the nominal GDP, which includes price changes, exceeded 600 trillion yen for the first time. Although the nominal value increased significantly due to rising prices, the real GDP growth remained flat.

The nominal GDP in 2024 was 609 trillion yen, and the nominal growth rate increased by 2.9% year-on-year, achieving positive growth for four consecutive years. The real GDP was 557 trillion yen, and the real growth rate was only 0.1%.

Since 1973, Japan’s nominal GDP has increased by about 100 trillion yen every five years, but since it exceeded 500 trillion yen in 1992, it has been stagnant for a long time. In 2015, then Prime Minister Shinzo Abe proposed a goal of 600 trillion yen by 2020, and now this goal has been achieved.

Judging from the various data of nominal growth rates, personal consumption increased by 2.1%, among which food categories such as instant rice, bento and cooked food performed outstandingly. However, actual personal consumption fell by 0.1% year-on-year, the first negative growth in four years. Usually, economic strength is mainly evaluated by actual data, and the recovery of personal consumption has not yet been completed.

If wage growth cannot keep up with price increases, the recovery of consumption may be frustrated. Although employee compensation increased nominally by 4.1%, the actual increase was only 1.4%. The spring labor-management negotiations in 2024 achieved a wage increase of more than 5% for the first time in 33 years. The trade union organization “United” said that the spring negotiations in 2025 will also aim for a wage increase of “more than 5%”. It is crucial to achieve wage growth that exceeds the increase in prices through price pass-through.

Against the backdrop of inflation and staff shortages, Japanese companies are accelerating equipment investment. In 2024, equipment investment increased nominally by 4.6% and actually by 1.2%, among which semiconductor manufacturing equipment performed strongly.

According to the Bank of Japan’s National Corporate Short-term Economic Outlook Survey (Tankan) released in December 2024, equipment investment plans for all industries and all-size companies in fiscal 2024 are expected to increase by 9.7% year-on-year, an increase from the forecast in the September survey.

However, despite the strong investment intention of Japanese companies, some projects are facing delays due to soaring raw material prices. For example, the reconstruction of the TOC Building, a comprehensive facility in Gotanda, Tokyo, was originally scheduled to start in April 2024, but due to the sharp increase in construction costs, it has been announced that the reconstruction plan will be postponed to around 2033.

At a cabinet meeting held at the Prime Minister’s Office on February 4, Japanese Prime Minister Shigeru Ishiba instructed to speed up measures to respond to rising prices. As the prices of rice and fresh vegetables continue to rise, he emphasized: “It is necessary to take detailed and thoughtful countermeasures before the effects of salary increases are apparent.”