Japan’s economic growth slowed to 2.2% on an annualized basis in the fourth quarter, complicating the central bank’s case for a further interest rate hike in the near term.

The revised data came in lower than economists’ median forecast and the initial estimate of 2.8% growth.

On a quarter-to-quarter basis, GDP expanded 0.6%, compared with a 0.7% growth in preliminary data released last month, the Cabinet Office’s revised data showed on Tuesday.

The Bank of Japan is likely to keep policy rate steady at its next policy meeting on March 18-19, Reuters reported. Yet the rate-setting board could be discussing another rate hike for as soon as May, due to concerns about inflationary pressure from wage gains and stubborn rises in food costs.

Japanese Prime Minister Shigeru Ishiba said on Monday that the central bank was close to achieving its 2% inflation target. “The Bank of Japan is taking various steps to achieve stable prices,” he said.

As the central bank sought to normalize its ultra-loose monetary policy last year, it has raised short-term interest rates by a quarter percentage to 0.5% in January — its highest level since the depth of global financial crisis in 2008.

Bank of Japan Governor Kazuo Ueda and other members of the rate-setting board have signaled further rate hikes if inflation moves durably toward its 2% inflation target.

The country’s 10-year government bond yields recently surged to its highest level since October 2008, amid sustained inflation in the country, a global sell-off in bonds, as well as central bank comments that it will continue to taper Japanese government bond purchases.

Japan’s headline inflation has stayed above the BOJ’s 2% target for 34 straight months, with the most recent figure in January hitting a two-year high of 4%.

The so called “core-core” inflation rate, which strips out prices of both fresh food and energy and is closely monitored by the BOJ, climbed slightly to 2.5% in January, hitting its highest rate since March 2024.

Separately, the BOJ is slated to release the corporate goods price index for January on Wednesday, which measures prices of goods companies charge each other. The gauge is expected to show a 0.1% month-on-month decline, according to a Reuters poll, while jumping 4.0% from a year earlier.

— CNBC’s Lim Hui Jie contributed to this report.