Japan unexpectedly entered a recession as its economy contracted for two consecutive quarters.
The country’s gross domestic product (GDP) shrank by 0.4% in the last three months of 2023, following a 3.3% contraction in the previous quarter.
This decline caused Japan to lose its position as the world’s third-largest economy to Germany. Economists had anticipated a GDP growth of over 1% for the fourth quarter of the year.
The International Monetary Fund (IMF) had forecasted Germany’s likely overtaking of Japan as the world’s third-largest economy, based on US dollar measurements.
However, Japan’s economy could regain its position if the yen strengthens against the dollar. The yen’s weakness has benefited Japanese exporters by making their products cheaper in international markets.
Despite the economic downturn, Tokyo’s main stock index, the Nikkei 225, reached its highest level since 1990.
The Bank of Japan may postpone raising interest rates further due to the recession, as negative rates have helped boost spending and investment in the past.