Japanese Economy Grows 0.6% in Q4, Out of Recession

Japan's economy grew 0.6 per cent in the three months to December, as the world's third largest economy crawled out of recession, the government said Monday, while the data showed flat growth for the full year.

The quarterly reading came in below the median forecast of 0.9 per cent growth in a survey by the Nikkei economic daily.

On an annualised rate, the economy expanded 2.2 per cent in the fourth quarter, the Cabinet Office said.

Over the full year, the data showed a flat 0.0 per cent growth rate for 2014, after a 1.6 per cent expansion in 2013. Finalised figures will be released in the following weeks.

Japan's economy contracted for the second straight quarter between July and September as consumer spending dropped sharply following an April sales tax rise aimed at shrinking the country's massive national debt.

But Japan has been seeing signs of a recovery -- including an uptick in factory output and a tight labour market.

The fall into recession dented Prime Minister Shinzo Abe's pro-spending growth bid, dubbed "Abenomics", which boosted stock prices and pushed the yen down, a plus for Japanese exporters.

But the levy hike to 8.0 per cent from 5.0 per cent -- Japan's first sales tax rise in 17 years -- slammed the brakes on consumer spending, plunging the economy into recession and throwing the success of Abenomics into question.

The tax rises are aimed at paying down Japan's enormous national debt, but they have put Abe in a tricky position as he tries to balance them with his growth plan.