Anemic domestic demand was cited as the primary reason for the downturn, prompting some observers of the central bank to reconsider their predictions on when Japan’s negative interest rate policy might be lifted.
The contraction, worse than anticipated, amounted to 0.4% in the last three months of 2023 compared to the previous year. This followed a sharp decline of 3.3% in the preceding quarter.
Japan’s Cabinet Office revealed these figures, hinting at the possibility of the country losing its standing as the world’s third-largest economy, potentially being overtaken by Germany.
Economists had initially projected a growth of over 1% in Japan’s GDP for the fourth quarter of the previous year, making these latest figures particularly surprising.
Typically, two consecutive quarters of economic decline define a technical recession, a status now applicable to Japan.
In October, the International Monetary Fund (IMF) forecasted Germany’s likely surpassing of Japan in terms of economic size, measured in US dollars.
The IMF awaits final economic growth figures from both nations before officially declaring a shift in rankings.
Economist Neil Newman noted that Japan’s economy was valued at approximately $4.2tn (£3.3tn) in 2023, slightly below Germany’s $4.4tn. The weakening of the Japanese yen against the dollar contributed to this disparity, and a yen recovery could potentially reverse the rankings.
The yen’s depreciation against the US dollar, by about 9% in the previous year, was highlighted by Gita Gopinath, the IMF’s deputy head, as a significant factor in Japan’s potential demotion in the rankings.
Despite the yen’s weakness, it has bolstered the stock prices of Japan’s major corporations, making exports more competitively priced in global markets.
This week, the Nikkei 225, Tokyo’s primary stock index, reached over 38,000 points for the first time since 1990, underscoring the country’s economic resilience amid challenges.
The latest GDP figures may delay the Bank of Japan’s anticipated decision to raise borrowing costs further. The central bank introduced negative interest rates in 2016 to stimulate spending and investment, and any adjustment may now be postponed given the economic downturn.
The contraction, worse than anticipated, amounted to 0.4% in the last three months of 2023 compared to the previous year. This followed a sharp decline of 3.3% in the preceding quarter.
Japan’s Cabinet Office revealed these figures, hinting at the possibility of the country losing its standing as the world’s third-largest economy, potentially being overtaken by Germany.
Economists had initially projected a growth of over 1% in Japan’s GDP for the fourth quarter of the previous year, making these latest figures particularly surprising.
Typically, two consecutive quarters of economic decline define a technical recession, a status now applicable to Japan.
In October, the International Monetary Fund (IMF) forecasted Germany’s likely surpassing of Japan in terms of economic size, measured in US dollars.
The IMF awaits final economic growth figures from both nations before officially declaring a shift in rankings.
Economist Neil Newman noted that Japan’s economy was valued at approximately $4.2tn (£3.3tn) in 2023, slightly below Germany’s $4.4tn. The weakening of the Japanese yen against the dollar contributed to this disparity, and a yen recovery could potentially reverse the rankings.
The yen’s depreciation against the US dollar, by about 9% in the previous year, was highlighted by Gita Gopinath, the IMF’s deputy head, as a significant factor in Japan’s potential demotion in the rankings.
Despite the yen’s weakness, it has bolstered the stock prices of Japan’s major corporations, making exports more competitively priced in global markets.
This week, the Nikkei 225, Tokyo’s primary stock index, reached over 38,000 points for the first time since 1990, underscoring the country’s economic resilience amid challenges.
The latest GDP figures may delay the Bank of Japan’s anticipated decision to raise borrowing costs further. The central bank introduced negative interest rates in 2016 to stimulate spending and investment, and any adjustment may now be postponed given the economic downturn.
