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Japan Narrowly Avoids a Technical Recession

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In the latest series of Recessions taking hold of developed countries, Japan narrowly escapes the same as the officials present a revised economic report. A 0.4% growth was seen in the revised report presented, which surpassed the growth rate of the last three months of 2023, compared to 2022. Ad-hoc figures were presented to predict the growth, with a novel comparison to the previous year.

Global demands including foreign direct investments, and the e-commerce business have also made a contribution of 0.2% to the GDP of the country.

"The headline is an upward revision, but domestic demand remains lackluster, particularly in consumption," said Saisuke Sakai, senior economist at Mizuho Research and Technologies.

A technical recession can be defined as a period when a country’s economy shrinks twice quarterly consecutively over a period of time.

Although the downturn got behind, experts were still counting on the reports showing only a minimal growth rate, as the former predicted a considerable upward trend in the market. This fall, the 1% growth prediction was the aimed target for the economy.

The Ministry of Finance of Japan displayed the numbers and data showing the sharp increase of companies of all types, reinvesting their profits back into their businesses, which made people optimistic about skidding off of recession.

In the midst of this finding, there was a 0.3% fall in private consumption, which in reality constitutes 60% of the economy, therefore making experts rethink the future, as per Japan’s Ministry.

The upcoming quarter may see the economy of Japan hitting low economic points in the chart, as Daihatsu, a car production company, along with Toyota has reportedly halted the majority of its operations, and also news of neighboring countries such as China having to bear a slow growth rate of their economy.

The Bank of Japan, being the central bank of the country, is predicted to raise the interest rates, which spurred the upward trend predictions of economic growth in the 4th quarter.

Marcel Thieliant, head of Asia-Pacific at Capital Economics, said "The Bank of Japan tends to put more emphasis on its consumption activity index and doesn't seem to be particularly concerned about the recent sluggishness in activity,"

The Bank has held a -0.1% interest rate, as the borrowing costs were cut to zero in 2016, boosting spending and investment by companies took the top priority.

The central bank is set to schedule a two-day policy meeting sometime during March, with the agenda set on scrutinizing the latest interest rate policies and taking steps as per the cabinet's report on the economy.

Foreign investors tend to not support the Yen, when interest rates fall to negative, thus sinking the value of the currency and limiting global outreach.

Source Credit: BBC

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