Japan's economy expanded at a slower than initially reported pace in the fourth quarter, with firms tightening spending on plant and equipment as the coronavirus pandemic clouded their business plans. 

The slower growth was mainly due to a sharper contraction in private inventories and capital expenditure expanding less than previously thought in the fourth quarter, even as exports remained solid. 

Separate data showed household spending was hit by a much bigger annual drop in January than in the prior month, a sign the Covid-19 pandemic was keeping consumers cautious about shopping. 

The economy grew an annualised 11.7% in the three months from October to December, weaker than the preliminary reading of 12.7% annualised growth to mark the second quarter of growth in a row, Cabinet Office data showed today. 

The reading, which was weaker than economists' median forecast for a 12.8% gain, translates into a real quarter-on-quarter expansion of 2.8% in the fourth quarter compared to a preliminary 3% gain. 

Capital spending grew 4.3% from the previous quarter, lower than a preliminary 4.5% rise, but outpacing the median forecast for a 4.1% increase. 

Private inventories, including raw materials and manufactured products, subtracted 0.6 percentage point from revised gross domestic product growth (GDP), which was more than a negative preliminary contribution of 0.4 percentage point. 

Analysts said that although vaccination started in Japan, it will take time to yield its impact, so the economy is forecast to go though some ups and downs.

They said they expect the economy will pick up from the second quarter but it will be difficult to regain soon what it will lose in the first quarter. 

Private consumption, which accounts for more than half of GDP, rose 2.2% from the previous three months, matching the preliminary reading. 

Net exports added 1.1 percentage point to revised GDP growth, while domestic demand lifted it by 1.8 percentage point, weaker than a preliminary contribution of 2.0 percentage point. 

The worse-than-expected GDP revision comes after exports and factory output picked up in January, signalling a stronger recovery in global demand following last year's deep coronavirus slump. 

Household spending, however, fell 6.1% in January compared with the same month a year earlier, official data showed today, much worse than the 2.1% drop expected by economists in a Reuters poll.  

Separate data showed real wages dropped for the 11th month in a row in January, although at a slower pace than in the prior month, as the pandemic continued to pressure corporate profits. 

Some analysts are worried that a cold spell in corporate investment and household spending could last longer than expected, boding ill for demand and threatening to leave the world's third-largest economy without a domestic growth driver. 

The Bank of Japan will conduct a review of its policy tools next week to make them more "effective and sustainable" as the pandemic forces it to keep its radical stimulus programme in place longer than originally expected.