Japan said goodbye to 2023 in a technical recession and gives Germany its position as the third world economy

MADRID, 15 Feb.

Japan said goodbye to 2023 in a technical recession and gives Germany its position as the third world economy


Japan's gross domestic product (GDP) registered a contraction of 0.1% in the fourth quarter of 2023 compared to the previous quarter, when it fell 0.8%, thus entering a technical recession by accumulating two consecutive quarters of falls in GDP. activity, according to data published by the Government of the Japanese country, which gives Germany third place among the largest world economies measured in dollars.

The drop in activity between October and December reflected a contraction in household consumption of 0.2%, after the drop of 0.3% in the previous three months, as well as 0.1% in the case of public investment, which had increased 0.3% in the third quarter.

In annualized terms, in the last quarter of 2023 the contraction of Japan's GDP was 0.4%, compared to the 3.3% drop observed between July and September.

In 2023 as a whole, the expansion of the Japanese economy in real terms was 1.9%, after 1% in 2022, although in nominal figures the growth was 5.7%, compared to 1.3%. of 2022.

"Despite the disappointing result in the fourth quarter, we expect GDP in the first quarter of 2023 to recover," said Min Joo Kang, senior economist for Japan at ING Research, for whom exports will continue to be the main driver of growth in the current quarter, while private consumption should also improve given the slight stabilization of inflation and the expectation of solid wage growth.

For his part, Marcel Thieliant, head of Asia Pacific at Capital Economics, adds that "it is debatable whether Japan has now entered a recession", since the unemployment rate fell to an eleven-month low of 2.4% in December and Business conditions across all sectors were the strongest since 2018 in the fourth quarter.

Likewise, the expert points out that "an upward revision is still possible in the second estimate of GDP for the fourth quarter, scheduled for March 11", so he doubts that the GDP figures will prevent the Bank from ending in April its negative interest rate policy.

The contraction of activity in Japan, but especially the effect of a more moderate inflation and especially the depreciation of the yen, would have caused Japan to cede to Germany its position as the third largest world economy in figures measured in dollars, something that the Fund International Monetary Fund (IMF) had anticipated last October.

In this sense, the exchange rate of the dollar against the yen has appreciated 15% since last year and exceeds 150 yen for each green bill, at its highest since last November, while its exchange rate against the euro has remained relatively stable in the same period.

Thus, while Germany announced in January that its nominal GDP in 2023 was about 4.12 trillion euros, which is equivalent to about 4.5 trillion dollars, according to the average exchange rate of the Bank of Japan, the Figures published this Thursday indicate that Japan's nominal GDP in 2023 was 591.48 trillion yen, about 4.2 trillion dollars at the exchange rate.

The Japanese economy ranked second globally, only behind the United States, until 2020, when it was surpassed in size by China.

Currently, the United States comfortably remains the world's leading economy with an estimated size of almost $28 trillion, compared to the Chinese economy's around $17 trillion.

For its part, the Indian economy, with almost 4 trillion dollars, would occupy fifth position, although with a growth rate much higher than the economies that precede it.