Japan unexpectedly slips into a recession
Japan has unexpectedly entered a recession, with its economy shrinking for two consecutive quarters.
The nation's GDP declined by a surprising 0.4% in the last quarter of 2023, following a 3.3% drop in the quarter before.
This economic downturn means Japan has been surpassed by Germany as the world's third-largest economy, against most economists' forecasts, which had anticipated a growth of over 1% in Japan's fourth-quarter GDP.
The initial estimates of Japan's economic performance might be subject to revisions, but typically, two successive quarters of decline define a recession. The IMF had predicted Germany would eventually outpace Japan in economic size when measured in US dollars.
The final determination will be made after the countries release their finalized economic data. Historically, the IMF has tracked and compared economies since 1980.
Economist Neil Newman pointed out that the faltering Japanese yen, which weakened significantly against the dollar, factored into Japan's economic slide.
In 2023, Japan's economy was valued at around $4.2 trillion, whereas Germany's reached $4.4 trillion. Should the yen recover, Japan might reclaim its position as the world's third-largest economy.
The IMF's Gita Gopinath has highlighted the yen's nearly 9% depreciation against the dollar as crucial in Japan's drop in ranking. Despite this, a weaker yen has inflated the profitability of Japan's major companies, making exports like automobiles more competitive internationally.
Reflective of this, Tokyo's Nikkei 225 index recently hit a significant milestone, exceeding the 38,000 mark for the first time since the economic downturn of 1990.
Japan's present economic status could lead to the Bank of Japan postponing a decision to increase interest rates. The negative interest policy introduced in 2016 aimed to encourage spending and investment, but it also reduced the yen's appeal to global investors, further decreasing its value.
This economic downturn means Japan has been surpassed by Germany as the world's third-largest economy, against most economists' forecasts, which had anticipated a growth of over 1% in Japan's fourth-quarter GDP.
The initial estimates of Japan's economic performance might be subject to revisions, but typically, two successive quarters of decline define a recession. The IMF had predicted Germany would eventually outpace Japan in economic size when measured in US dollars.
The final determination will be made after the countries release their finalized economic data. Historically, the IMF has tracked and compared economies since 1980.
Economist Neil Newman pointed out that the faltering Japanese yen, which weakened significantly against the dollar, factored into Japan's economic slide.
In 2023, Japan's economy was valued at around $4.2 trillion, whereas Germany's reached $4.4 trillion. Should the yen recover, Japan might reclaim its position as the world's third-largest economy.
The IMF's Gita Gopinath has highlighted the yen's nearly 9% depreciation against the dollar as crucial in Japan's drop in ranking. Despite this, a weaker yen has inflated the profitability of Japan's major companies, making exports like automobiles more competitive internationally.
Reflective of this, Tokyo's Nikkei 225 index recently hit a significant milestone, exceeding the 38,000 mark for the first time since the economic downturn of 1990.
Japan's present economic status could lead to the Bank of Japan postponing a decision to increase interest rates. The negative interest policy introduced in 2016 aimed to encourage spending and investment, but it also reduced the yen's appeal to global investors, further decreasing its value.
