The economy shrank 6.7 per cent in the three months after Prime Minister Shinzo Abe increased the sales tax in April. Photo / AP
Japan's economy expanded less than economists estimated in the fourth quarter, underlining the difficulty in stoking growth while export gains are undermined by weak investment and consumption at home.
Gross domestic product grew at an annualised 2.2 per cent, less than a median forecast for a 3.7 per cent increase.
The softness of the rebound shows Prime Minister Shinzo Abe's challenge to revive the world's third-largest economy from two decades of stagnation. Wage rises and increased consumer spending are likely to be pivotal this year to spur activity beyond exports, where the lower yen has contributed to surging profits at companies such as Toyota.
"Japan has clawed its way out of recession but we are looking for a modest acceleration in growth," said Izumi Devalier, an economist at HSBC Holdings in Hong Kong.
"This is not the picture of an economy that has a lot of spark behind it."
The yen has weakened about 28 per cent against the US dollar since Abe took power in December 2012 with a pledge to revive the economy with his Abenomics reflation policies.
