Japan’s gross domestic product shrank by 0.4% in the last quarter of 2023, the Japanese Cabinet Office said — far below the 1.4% growth estimate. This followed a third quarter of 2023 in which GDP growth shrank by 3.3%. Most economists officially define a recession as “two consecutive quarters of economic contraction,” CNN said, so Japan’s economy is clearly on a troubling trend.
What makes this all the more surprising is the recession comes as Japan’s stock market, the Nikkei, is anything but down — just two days ago, it crossed 38,000 points for the first time since 1990. Most experts also agree that the Nikkei will continue to trend upward. The fact that Japan’s economy is doing so poorly when its stock market is skyrocketing seems to be antithetical.
While global inflation has been slowing for a while, Japan’s “so-called ‘core-core inflation,'” inflation minus food and energy prices, has exceeded the Bank of Japan’s 2% target for “15 straight months now,” Clement Tan said for CNBC. As a result, the negative quarterly results from Thursday’s report “throw into question the BOJ’s preference for inflation in Japan to be driven by domestic demand, which is more sustainable and stable.”