Japan's fragile Q4 economic recovery poses early test for Takaichi

TOKYO, Feb 16 (Reuters): Japan's economy limped back to meagre growth in the fourth quarter, significantly missing market expectations in a key test for Prime Minister Sanae Takaichi's government as cost-of-living pressures drag on confidence and domestic demand.

Fresh off a sweeping election victory, Takaichi's administration is preparing to ramp up investment through targeted public spending to shore up consumption and revitalise economic growth.

Monday's data brings sharp focus to the challenge at hand for policymakers at a time when the Bank of Japan has reiterated its pledge to keep raising interest rates and normalise monetary settings from years of ultra-low borrowing costs amid persistent inflation and a weak yen.

"PM Takaichi's efforts to reflate the economy via looser fiscal policy look prescient," said Marcel Thieliant, head of Asia-Pacific at Capital Economics.