Japan’s economy unexpectedly contracted for a second straight quarter from October to December, pushing the country into its first technical recession since 2015. Driven by weak domestic consumption amid high inflation, gross domestic product shrank an annualized 0.4% during the quarter. With the back-to-back declines, Japan has also ceded its rank as the world’s third-largest economy to Germany in terms of US dollar terms.
Private consumption, which accounts for half of the Japanese economy, declined by 0.2% as consumers struggled with rising prices for essentials like food, fuel and other household items. Japan imports 94% of its energy needs and 63% of its food, meaning the weak yen has significantly driven up the cost of living. “Private consumption was particularly weak, with market expectations for it to be flat,” said Neil Newman, a Tokyo-based strategist at research firm Japanmacro. “Unfortunately, this will get worse in January following the Sea of Japan earthquake. People stop spending in times of natural disasters.” Additionally, you can also read about- Jeff Bezos Unloads $4B in Amazon Shares.
Economists had projected a slight 0.2% growth in the fourth quarter, not a contraction. The unexpected recessionary downturn highlights the challenges facing the world’s fourth-largest economy. Inflation remains high at 4%, squeezing households. The Bank of Japan’s ultra-loose monetary policy aimed at revitalizing growth appears to have fallen short as domestic demand withers. With the country already reeling from the earthquake and consumers closing their wallets, recovery remains uncertain.
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