Japan falls into recession

Japan has suddenly fallen into a downturn after its economy shrank for two quarters in succession.

The nation’s GDP (Gross domestic product) shrunk by a more terrible than-anticipated 0.4% over the most recent three months of 2023, contrasted with a year sooner. It came after the economy shrank by 3.3% in the past quarter. The figures from Japan’s Bureau Office likewise demonstrate that the nation has lost its situation as the world’s third-biggest economy to Germany.

Economists had expected the new data to show that Japan’s GDP grew by more than 1% in the fourth quarter of last year. The latest figures were the first reading of Japan’s economic growth for the period and could still be revised. Two quarters in a row of economic contraction are typically considered the definition of a technical recession.

In October, the International Monetary Fund (IMF) forecast that Germany was likely to overtake Japan as the world’s third-largest economy when measured in US dollars. The IMF will only declare a change in its rankings once both countries have published the final versions of their economic growth figures. It began publishing data comparing economies in 1980.

Economist Neil Newman told the BBC that the latest figures show that Japan’s economy was worth about $4.2tn (£3.3tn) in 2023, while Germany’s was $4.4tn. This was due to the weakness of the Japanese currency against the dollar and that if the yen recovers, the country could regain the number three spot, Mr Newman added.