By ronniechua @ Adobestock.com

Japan’s GDP shrank unexpectedly in the fourth quarter of 2023, putting the country into a technical recession. A technical recession occurs when a nation’s GDP drops for two consecutive quarters. That shouldn’t be confused with an official recession, which is usually determined by a group of economists such as the NBER in the United States. In The Wall Street Journal, Megumi Fujikawa and Fabiana Negrin Ochoa report on the Japanese economy, writing:

Japan dropped a rank to become the world’s fourth-largest economy after a weak end to 2023, as growth in tourism spending failed to offset sluggishness in domestic private consumption and capital spending.

Japan’s gross domestic product shrank 0.1% in the three months to December from the previous quarter, government data showed, weaker than economists’ forecast for 0.2% growth. The economy contracted 0.8% in the July-September quarter.

Although the economy weakened late in the year, real GDP grew 1.9% in 2023, improving on 2022’s 1.0% expansion. In nominal terms, Japan’s GDP was worth 591.482 trillion yen, or about $3.93 trillion, at current exchange rates. That puts Germany’s economy, with its 2023 GDP of about $4.42 trillion, in third spot globally.

Using the average exchange rate during 2023 according to the Federal Reserve, Japan’s GDP in 2023 would be about $4.2 trillion and Germany’s $4.46 trillion.

Technically, the Japanese economy is in recession, as it has contracted for two consecutive quarters. However, the data are preliminary and the drop small enough to leave room for doubt about whether the country has really slipped into recession. Revised estimates due next month could paint a different picture.

“Whether Japan has now entered a recession is debatable,” Capital Economics said after Thursday’s data.

Though GDP contracted for a second-straight quarter, “business surveys and the labor market tell a different story,” said Marcel Thieliant, head of Asia-Pacific at the research firm.

He points to Japan’s unemployment, which fell to an 11-month low in December, and the Bank of Japan’s Tankan survey, which “showed that business conditions across all industries and firm sizes were the strongest they’ve been since 2018.”

Read more here.