A store employee stands in front of binoculars displayed at a department store in Tokyo on October 22, 2021.
Behrouz Mehri | Afp | Getty Images
Japan lost its place as the world’s third-largest economy to Germany, while the Asian giant unexpectedly slipped into recession.
Japan, once the world’s second-largest economy, posted two consecutive quarters of contraction on Thursday, losing 0.4% on an annualized basis in the fourth quarter after a revised 3.3% contraction in the third quarter. Fourth-quarter GDP broadly missed forecasts of 1.4% growth in a Reuters poll of economists.
A recession is generally defined as two consecutive quarters of contraction.
On a quarterly basis, GDP fell 0.1%, compared with a 0.3% increase expected in the Reuters poll.
For full-year 2023, Japan’s nominal GDP grew 5.7% year-on-year to 591.48 trillion yen, or $4.2 trillion based on the average exchange rate in 2023. The Germany, on the other hand, saw its nominal GDP grow 6.3% to reach 4.12 trillion euros, or $4.46 trillion based on last year’s average exchange rate.
Nominal GDP measures the value of production in current dollars, unadjusted for inflation.
In response to the latest GDP release, the benchmark Nikkei 225 rose 0.65% and briefly crossed the 38,000 mark in the morning session, as investors saw the weak economic reading as a sign that the Bank of Japan might delay his long-standing exit from the country. negative interest rate policy.
The yen continued to hover around the 150 mark against the dollar, trading at 150.2 at 1:55 pm Tokyo time.
“This dire growth picture makes it even more difficult for the BOJ to tighten monetary policy,” Charu Chanana, head of FX strategy at Saxo Markets, said in a Feb. 15 note.
In an earlier note, Chanana said the contraction in GDP for the third quarter “weakens belief that inflation is truly driven by a virtuous cycle of rising real income and spending.”