Japan Undergoes Recession

Japan Undergoes Recession by Ashly Chole last updated on July 10, 2024

Japan Undergoes Recession On Weak Consumption

The latest data reveals Japan's economy has entered a recession phase since December 2023. As a result, Japan has also lost its spot as the 3rd top economy, and now Germany holds its place.

The recent update has also started to raise concerns about when the Bank of Japan will let go of its loose monetary policy. Interestingly, BoJ has kept this policy for almost a decade, which is a really long time.

Trouble Ahead For Boj

Although things are not going well for the Japanese economy, experts hint at more trouble ahead. For starters, the Chinese demand is weak, which will also translate into weakness for the Japanese economy.

Another development is from the Toyota Motor (TM), which is also undergoing production halts and a weak consumption. Although Toyota Motor is just one Japanese firm, it highlights the troubles the entire economy faces.

According to one expert, the lack of momentum in the Japanese economy will stay intact for the foreseeable future. They added that there are yet to be growth drivers for the economy.

Japan's GDP contracted by 0.4% during Q4 of 2023, while the previous quarter showed a 3.3% reading. Although the contraction speed has gone down, it still missed the +1.4% forecast made by the economists.

The bottom line is that Japan has gone through 2 quarters of contraction in a row, which is the classic definition of recession.

Many experts are optimistic that BoJ will end its current policy in 2024. However, if we look at the weak data from Japan, it starts to cast doubts about this forecast.

Given the weakness in economic activity and a shrinking GDP, it has become more difficult for BoJ to relinquish the loose monetary policy in favour of a hawkish one.

That's why we can't count on a single rate hike, let alone multiple hikes throughout the year.