Japan loses its spot as world’s third-largest economy as it slips into recession.
Japan is no longer the third-largest economy in the world. The Asian country has lost that position to Germany, after it contracted for the last six months of 2023 and entered a recession. Official data shows that Japan’s economy unexpectedly shrank due to weak domestic demand
Japan’s economy unexpectedly slipped into recession after shrinking for a second quarter due to anemic domestic demand, prompting some central bank watchers to push back bets on when the nation’s negative interest rate policy will end.
Gross domestic product contracted at an annualised pace of 0.4% in the final three months of last year, following a revised 3.3% retreat in the previous quarter, the Cabinet Office reported Thursday.
The report showed both households and businesses cut spending for a third straight quarter as Japan’s economy slipped to fourth-largest in the world in dollar terms last year. Germany now has the world’s third-largest economy.
The weaker-than-expected result will complicate the BOJ’s case to conduct the first rate hike in Japan since 2007, a step most economists surveyed last month predicted the bank would take by April.
The BOJ’s policy board has recently ramped up discussions surrounding an exit from the subzero rate policy and sought to assure markets that a rate hike wouldn’t signal a sharp shift in policy.
Net exports contributed 0.2 percentage point to growth. Exports jumped in December, led by automobiles to the US and chip manufacturing gear to China. Inbound tourism, classified as service exports, also saw continued growth, with the number of visitors setting a record for the month in December.
