Japan unexpectedly enters recession as its economy contracts for two consecutive quarters, with the gross domestic product (GDP) shrinking by 0.4% in the final quarter of 2023, following a 3.3% contraction in the previous quarter.
This downturn results in Japan losing its position as the world’s third-largest economy to Germany. Economists had anticipated GDP growth of over 1% for the fourth quarter.
Two consecutive quarters of economic contraction meet the technical definition of a recession.
The International Monetary Fund (IMF) had predicted Germany would surpass Japan as the third-largest economy, pending final economic growth figures from both nations.
Japan’s weakened currency against the dollar contributes to its economic decline, with its economy valued at $4.2tn in 2023 compared to Germany’s $4.4tn.
The IMF attributes Japan’s potential slip in rankings to the yen’s depreciation against the dollar.
Despite the yen’s weakness, it benefits Japan’s exports, leading to increased share prices for major companies.
Tokyo’s Nikkei 225 index reaches its highest level since 1990, supported by the yen’s devaluation.
The latest GDP figures may delay the Bank of Japan’s decision to raise borrowing costs, as it introduced negative interest rates in 2016 to stimulate spending and investment.
Negative rates make the yen less appealing to investors, thereby lowering its value.
Source-BBC
