Japan’s economy narrowly avoids recession as growth figures revised (2024)

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Japan’s economy narrowly avoids recession as growth figures revised? ›

Japan has avoided falling into a technical recession after its official economic growth figures were revised. The revised data shows gross domestic product (GDP) was 0.4% higher in the last three months of 2023 compared to a year earlier.

The fresh data meant Japan's economy, now the world's fourth-largest behind Germany, avoided a technical recession thanks to companies' stronger-than-expected spending on plants and equipments. On a quarter-on-quarter basis, GDP grew 0.1%, compared with the initial 0.1.

Japan entered a technical recession in H2 2023. The first estimate of Q4 GDP indicates a modest contraction of -0.1% q/q following a more significant downturn of -0.8% q/q in the previous quarter.

Stagnant growth in subsequent years has led the period since 1991 to sometimes be referred to as Japan's Lost Decades. Misguided government policies in response to a real estate bubble are considered to be the main culprits for the Lost Decade.

Japan's economy avoided falling into a recession at the end of last year, helped by robust spending by businesses, an outcome that improves the optics for the central bank as it mulls the timing of its first interest rate hike since 2007.

Japan has avoided falling into a technical recession after its official economic growth figures were revised. The revised data shows gross domestic product (GDP) was 0.4% higher in the last three months of 2023 compared to a year earlier.

The low cost of imported technology allowed for rapid industrial growth. Productivity was greatly improved through new equipment, management, and standardization. MITI gained the ability to regulate all imports with the abolition of the Economic Stabilization Board and the Foreign Exchange Control Board in August 1952.

Japan is one of the largest and most developed economies in the world. It has a well-educated, industrious workforce and its large, affluent population makes it one of the world's biggest consumer markets.

The Japanese economy is the fourth-largest in the world, as measured by gross domestic product (GDP). Japan has a market economy that grew extraordinarily quickly for several decades after World War II.

Japan was hit hard by the global financial crisis of 2008-2009; it was the only major advanced economy that experienced negative economic growth in 2008 and continues to contract sharply in 2009 (Figure 1).

Who owns most of Japan's debt? ›

But most of Japan's debt is owned by domestic investors. The country's external position is bolstered by a large current account surplus and foreign exchange reserves worth more than $1 trillion. At the end of last year, Japan's overseas assets were around 84% of its annual economic output.

In such a situation, Japanese companies began to cut wages, research and development, and other investments, opting to hold onto cash instead. This tendency, coinciding with the acceleration of the ageing population, gradually diminished the competitiveness of the economy and the potential growth rate of the country.

Third, Japan's population structure was shifting and becoming increasingly elderly. The aging meant slower growth of the labor force. The aging and the declining fertility also reduced the domestic saving that supported economic expansion during the rapid economic growth period.

On a quarterly basis, GDP expanded 0.1 percent, revised up from an estimated 0.1 percent decline. Japan's government last month announced provisional figures showing that the economy had unexpectedly slipped into recession amid sluggish domestic demand and private consumption.

Synopsis. Japan's economy slipped into recession on weak domestic demand, raising uncertainty about the central bank's plans. Japan lost its title as the world's third-largest economy. BOJ may sharply downgrade GDP forecasts.

“We can finally confirm a recovery from that.” Economists forecast Japan's economy contracted a bit in the first quarter of 2024 after eking out growth in the last period of 2023. Saito said he believes the economy will return to growth in the second period.

Inflation is soaring in countries around the world – but not in Japan. Government price controls, an ageing population and negative interest rates are among the factors keeping down inflation in Japan.

2 - Economic liberalization

Japan has become one of the most open economies in the world. The government ended controls on the financial system, and the country's high savings rate and investment rate have allowed for rapid capital accumulation.

General crisis response in Japan

To this end, the Government set a record-high ¥88.55 trillion budget for the fiscal year 2009-2010 (ending March 2010). In April 2009 it announced a ¥15.4 trillion stimulus plan, equal to 3 percent of GDP, which brought Japan's total stimulus spending since autumn 2008 to ¥27 trillion.

Between 1931 and 1933, the government switched to Keynesian policies, well ahead of other Western countries, to boost aggregate demand. Currency depreciation, fiscal stimulus, and easy monetary conditions helped Japan to recover from the worldwide depression earlier than most countries in Europe and North America.