Japan’s economy has contracted unexpectedly, pushing the country into recession and causing it to lose its position as the world’s third largest economy to Germany. Gross domestic product shrank at an annualized pace of 0.4 per cent in the last three months of 2023, the Cabinet Office said on Thursday, after having contracted in the previous quarter.
A technical recession is often defined as two consecutive quarters of negative growth in the real GDP. According to the news report, the Asian economy slipped into recession because of weak domestic consumption. Private consumption, which accounts for half of the economy, declined by 0.2 per cent, as Japanese consumers battled higher prices for food, fuel and other goods.
Japan imports 94% of its energy requirements and 63% of its food, so the weak yen significantly contributes to a higher cost of living. Similarly, a weak currency typically makes imports costlier.
Private consumption has been particularly weak, and market expectations are expected to be flat. Recent earthquakes in Japan made things worse for the country as Ppeople stop spending in times of natural disasters.