US Markets
Thursday, February 15th, 2024 5:22 pm EDT
Key Points
- Japan has lost its position as the world’s third-largest economy to Germany due to an unexpected recession.
- Japan reported two consecutive quarters of contraction, with a 0.4% decrease in the fourth quarter following a revised 3.3% contraction in the third quarter, sharply missing forecasts for growth.
- Despite a 5.7% nominal GDP growth in 2023, Japan’s economy trailed behind Germany’s, which experienced a 6.3% growth, leading to a significant difference in nominal GDP between the two countries.
Japan, once the world’s second-largest economy, has been displaced by Germany to become the fourth-largest, owing to an unexpected recession. The country reported two consecutive quarters of contraction, with a 0.4% annualized decrease in the fourth quarter, following a revised 3.3% contraction in the third quarter. This performance starkly contrasts with forecasts, as fourth-quarter GDP fell short of the expected 1.4% growth. A recession, defined as two consecutive quarters of contraction, became evident, with GDP slipping 0.1% quarter-on-quarter, contrary to expectations of a 0.3% rise. Despite a 5.7% nominal GDP growth in 2023, reaching 591.48 trillion yen, Japan’s economy lagged behind Germany, whose 6.3% growth propelled it to 4.12 trillion euros, or $4.46 trillion. Nominal GDP, measuring output value in current dollars without inflation adjustments, highlights the economic dynamics. In response to the GDP release, the Nikkei 225 index surged 0.65%, briefly surpassing the 38,000 mark, suggesting investor anticipation of a delayed exit from Japan’s negative interest rate policy by the Bank of Japan. The yen maintained its position around 150 against the dollar, standing at 150.2 as of 1:55 p.m. Tokyo time. Charu Chanana, head of FX strategy at Saxo Markets, noted the challenges posed by Japan’s dismal growth in tightening BOJ policy, casting doubts on whether inflation is driven by a sustainable cycle of increased real income and spending.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/02/15/japan-loses-spot-as-worlds-third-largest-economy-to-germany.html
