Tokyo reports recession
Germany replaces Japan as the third largest economy in the world
February 15, 2024, 3:42 a.m
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Due to weak domestic demand, Japan’s economy unexpectedly slipped into recession, with gross domestic product falling for the second time in a row. This means that Germany has moved up one place in international comparison.
According to data from Tokyo, Germany has replaced Japan as the world’s third largest economy behind the USA and China. Despite growing its gross domestic product (GDP) by 1.9 percent last year, Japan was overtaken by Germany, according to economic data released by the Japanese government. Japan’s GDP in 2023 was 4.2 trillion dollars (3.9 trillion euros), below Germany’s GDP of the equivalent of 4.5 trillion dollars.
Gross domestic product fell by a further 0.4 percent on an annualized basis in the October-December period, after having already collapsed by 3.3 percent in the previous quarter. Market forecasts had predicted growth of 1.4 percent. Two consecutive contracting quarters is considered the definition of a recession. The Asian country’s economy is particularly affected by the decline in the national currency, the yen.
The weak data could raise doubts about the Japanese central bank’s forecast that rising wages will stimulate domestic demand and thus justify an end to loose monetary policy. “There is a risk that the economy will contract again in the January-March quarter due to slowing global growth, weak domestic demand and the impact of the New Year’s quake in western Japan,” said Takuji Aida, chief economist at Credit Agricole. “The BOJ may be forced to sharply downgrade its rosy GDP forecasts for 2023 and 2024.”
Germany’s rise to the third largest economy in the world is largely symbolic. After all, Germany is struggling with economic problems. Last year the German economy shrank by 0.3 percent. Only slight growth of well under one percent is expected for this year.