Japan’s economy contracted 0.4% in the fourth quarter, compared to a year ago, and after a revised 3.3% drop in the third quarter ended September 2023.
The fourth quarter reading was may below expectations of 1.4% growth by a Reuters poll.
On a quarter-to-quarter basis, Japan’s economy also contracted 0.1% in the fourth quarter and after a slump of 0.8% in the third quarter. It was also weaker than a 0.3% expansion expected by economists.
The fall in the fourth quarter complicated policy movement from the Bank of Japan for interest rate normalization and also fiscal policy support for Japanese Prime Minister Fumio Kishida. With the latest shrinkage, Germany has taken the position of the world’s third largest economy last year in dollar terms.
Still, some analysts believe that the technical recession does not reflect the true economic situation in Japan.
Marcel Thieliant, Capital Economics’ head of Asia-Pacific, wrote in a note to clients that it is still debatable that Japan has now entered a recession, seeing weak job vacancies and unemployment rate that dropped to 11-month low. Meanwhile, the Tankan survey showed that business conditions across all industries were at their strongest since 2018.
Despite that, he noted that growth should remain sluggish this year, citing the household saving rate turning negative.
