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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

Economy

Economy

Japan’s Unforeseen Challenge: Slipping into Recession Unexpectedly

Japan's Unforeseen Challenge: Slipping into Recession
Japan's Unforeseen Challenge: Slipping into Recession

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Japan’s Unforeseen Challenge:

Japan has unexpectedly entered a recession as its economy experienced contraction for two consecutive quarters. The country’s Gross Domestic Product (GDP) recorded a more significant-than-anticipated decline of 0.4% in the last quarter of 2023 compared to the previous year. This follows a substantial shrinkage of 3.3% in the preceding quarter. The figures released by Japan’s Cabinet Office also reveal a significant development – Japan has now been surpassed by Germany, losing its position as the world’s third-largest economy.

Economists had initially anticipated positive growth of over 1% in Japan’s GDP for the fourth quarter of the previous year. These figures, the initial reading of Japan’s economic growth during this period, remain subject to potential revisions. Typically, two consecutive quarters of economic contraction define a technical recession.

In October, the International Monetary Fund (IMF) forecasted Germany’s likelihood to overtake Japan as the third-largest global economy when measured in US dollars. The IMF awaits the publication of the final economic growth figures by both countries before officially declaring any change in rankings. Economist Neil Newman explained that based on the latest figures, Japan’s economy stood at approximately $4.2 trillion (£3.3 trillion) in 2023, slightly trailing Germany’s $4.4 trillion.

The weakness of the Japanese currency against the dollar played a pivotal role in this shift. If the yen were to strengthen, Japan could potentially reclaim its third position. Notably, the yen’s depreciation by about 9% against the US dollar last year contributed to Japan’s vulnerability in the economic rankings.

Despite economic challenges, the yen’s weakness has had a positive impact on the share prices of major Japanese companies, making exports more competitive in international markets. This week, Tokyo’s primary stock index, the Nikkei 225, exceeded the 38,000 mark for the first time since 1990. However, the recent GDP data suggests potential delays in the Bank of Japan’s decision to raise borrowing costs. The central bank, aiming to stimulate spending and investment, introduced a negative interest rate in 2016. Negative rates make the yen less appealing to global investors, leading to a depreciation of the currency’s value.


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