Japan's economy picked up some momentum in the last quarter of 2018 but still slowed from the growth seen in the previous year.
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The 1.4 percent rebound in annualized growth for October-December contrasted with a revised 2.6 percent contraction in the previous quarter, according to data reported Thursday by the Cabinet Office.
It showed a recovery in consumer demand, investment and government spending in the world's third-largest economy.
But the 0.7 percent expansion in the full year was much slower than the 1.9 percent annual growth logged in 2017.
Gross domestic product, or the total value of a nation's goods and services, had contracted during the July-September quarter.
Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities, said risks remain, such as trade friction with the U.S. over Japan's exports of autos and auto parts, and a hike in the sales tax planned for October.
President Donald Trump has imposed tariffs on imports from China that are due to increase if talks underway in Beijing this week fail to make progress on longstanding, difficult issues related to technology and other broad structural problems. Higher tariffs on Chinese exports could hurt Japanese manufacturers both directly and indirectly.
Trump has also complained over Japan's trade surplus with the U.S., adding to the uncertainty.
On the domestic front, the plan to raise the consumption tax in October from 8 percent to 10 percent could crimp consumer spending.
Raising that tax has been a major policy challenge for Prime Minister Shinzo Abe, who has twice postponed the increase. The feared social backlash could figure in upcoming elections.
Consumer demand helped boost the economy late last year and might remain relatively strong as shoppers try to beat the tax increase.
Despite the improved numbers for the October to December quarter, industrial output was flat compared with a year earlier, Marcel Thieliant of Capital Economics said in a commentary.
"Meanwhile, external headwinds are mounting. We expect demand in Japan's main export markets to weaken this year," he said, forecasting that growth would pick up this year to about 1.0 percent. "And recent data suggests that the risks to that forecast are on the downside."