Japan Unexpectedly Enters Recession, Loses Third-Biggest Economy Status to Germany 🇯🇵🇩🇪

Japan has unexpectedly slipped into a recession at the close of last year, relinquishing its position as the world’s third-largest economy to Germany. The development raises concerns about the timing of the central bank’s exit from its decade-long ultra-loose monetary policy. Analysts warn of a potential contraction in the current quarter due to weak demand in China, sluggish consumption, and production halts at a Toyota Motor Corp unit. The unexpected contraction in Japan’s gross domestic product (GDP), down 0.4% in the October-December period, challenges market forecasts and poses challenges to economic recovery and policymaking. While some anticipate the Bank of Japan phasing out its monetary stimulus this year, the weak data may cast doubt on its projection of rising wages sustaining consumption and inflation around the 2% target. The data’s impact on BOJ policy remains uncertain, making the justification for a rate hike more challenging.