The Strategist

Japan is no longer the world's third largest economy

02/16/2024 - 02:01

Japan's economy no longer ranks third in the world, writes Bloomberg; Germany now holds that position.

Japan's economy lost ground to Germany to become the third largest in the world due to weak indications. The United States is in the lead, followed by China in second position.

According to Bloomberg, weak domestic demand caused the Japanese economy to shrink for two straight quarters before it unexpectedly entered a recession. The Japanese government reports that the country's GDP contracted by 3.3% in the third quarter of last year before declining by 0.4% at an annualized pace in the fourth quarter. Spending by businesses and households fell for the third straight quarter.

Due to earnings growing less quickly than inflation, household consumption decreased by 2.5% in December compared to the same month last year. Business spending in the most recent quarter decreased by 0.1% as well.

The Bank of Japan was expected by most observers to hike its benchmark rate by April for the first time since 2007; however, Bloomberg reports that the regulator's decision will be more difficult to make in light of the poor economic data.