Latest News

Japan’s Economy is suffering from Recession, Read full report here


➡️ Click here to join our Whatsapp Group

In late 2023, Japan unexpectedly entered a recession, causing it to slip from being the world’s third-largest economy behind Germany.

Economic Decline in Japan:

During the last quarter of 2023, Japan’s GDP shrank by 0.4%, following a 3.3% decline in the previous quarter. Gross domestic product (GDP) shrank at an annualized pace of 0.4% in the last three months of 2023, the Cabinet Office said on Thursday, after having contracted by an annualized 3.3% in the previous quarter. A recession is typically defined as two consecutive quarters of economic contraction.

The decline was well below market forecasts. Economists polled by Reuters had expected GDP to grow by an annualized 1.4% quarter-on-quarter in the October to December months.

Uncertainty Surrounding Monetary Policy:

The recession has raised questions about when Japan’s central bank will begin to change its long-standing policy of keeping interest rates very low.

Japan’s Economic Standing Compared to Germany:

Last month, Germany’s GDP reached $4.5 trillion, surpassing Japan’s $4.2 trillion.

Concerns Raised by Experts:

Experts are worried about another economic decline in Japan due to factors such as weak demand from China, slow spending by consumers, and production stoppages at Toyota Motors.

Analysis of Economic Weakness:

Yoshiki Shinke, an economist, pointed out slow spending by consumers and businesses, which are important for the economy, and stated that Japan needs new ways to grow.

Private consumption — which accounts for half of the economy — declined by an annualized 0.9% in the fourth quarter, as Japanese consumers battled higher prices for food, fuel and other goods. It marks a third straight quarter of falls.

Japan imports 94% of its base energy requirements and 63% of its food, so the weak yen significantly contributes to a higher cost of living, Neil Newman, a Tokyo-based strategist at Japanmacro, told CNN.

Doubts on Bank of Japan’s Predictions:

The Bank of Japan’s prediction that higher wages would lead to increased spending and maintain inflation at 2% is being questioned due to recent economic data.

Impact on Monetary Policy:

Two consecutive quarters of economic decline and a sustained drop in domestic demand make it harder for the Bank of Japan to justify raising interest rates.

Expectations for Monetary Policy:

The Bank of Japan plans to end its policy of negative interest rates by April but is expected to proceed cautiously with further changes due to ongoing risks.

Reasons Behind Japan’s Recession:

The recession in Japan is mainly caused by a decrease in domestic spending, which makes up almost half of the economy.

Factors Affecting Domestic Consumption:

High prices and warmer weather deterred Japanese people from spending money on dining out or buying winter clothes.

Germany’s Economic Challenges:

Germany, despite surpassing Japan in economic size, faced its own difficulties, including a 0.3% decline in GDP in 2023.

Challenges in Germany:

Germany is dealing with issues like budgetary chaos, protests from farmers against cutting diesel subsidies, labor shortages in skilled industries, and slower global growth, especially in China.

Leave a Reply

Your email address will not be published. Required fields are marked *