Lucas de la Cal Correspondent in Asia

Asia correspondent

Updated Thursday, February 15, 2024-08:47

  • UK economy entered recession at the end of 2023

Long gone are those times when it seemed that

Japan

was going to fight with

the United States

for hegemony as the first economic superpower. After centuries of isolation and having been humiliated on the losing side of World War II, the country recovered quickly and its locomotive began to perform at a speed and productivity that impressed the entire world. Economists dubbed it the "Japanese economic miracle" in the early 1990s.

The Asian nation became the second largest economy in the world. But it had hit its ceiling. The fall was painful when, in 2010, neighboring

China

, in the midst of uncontrolled development, took second place from it. Now, weak domestic consumption, inflation and demographic disaster have pushed Japan (125 million inhabitants) into a recession that has made it lose

its position as third economy to

Germany (83 million).

Tokyo

announced this Thursday that, although the economy grew by 1.9% in 2023,

nominal GDP amounted to 4.2 trillion dollars

, while Germany's was 4.4 or 4.5 trillion, depending on the monetary conversion.

The

weakness of the yen

is being a major drag on the Japanese economy, which is reducing export earnings. The currency fell 18% against the US dollar in 2022 and 2023, including 7% depreciation last year.

High inflation

Japanese authorities have announced that the economy has fallen into a technical recession after contracting in the October-December 2023 period, with high inflation slowing demand and domestic consumption.

GDP contracted 0.4% in the fourth quarter compared to the same period in 2022, and 0.1% compared to the previous quarter. The fall is interpreted as a recession because there are already two consecutive quarters of economic contraction. The Minister of Economy,

Yoshitaka Shindo

, highlighted the urgent need to achieve "solid wage growth" to support consumption that "lacks momentum" due to rising prices.

Reuters analysts in Tokyo point out that although Japan's central bank is expected to gradually phase out its huge monetary stimulus this year, the weak data may cast doubt on the forecast that rising wages will shore up consumption and maintain inflation. inflation lastingly around its 2% target.

"All these data reflect the reality of a weakened Japan. The gap between developed countries and emerging nations is narrowing. In this case, India will surely surpass Japan in nominal GDP within a few years," argues

Tetsuji Okazaki

, professor of Economics from the University of Tokyo.

What happened to the praised Japanese miracle? There is a prominent local economist named

Aoki Masahiko

who coined the concept "lost decades" in reference to how Tokyo, after experiencing enormous sustained growth (thanks to technological development, capital accumulation and increase in the quantity and quality of labor) between 1945 and 1991, the period between the postwar period and the end of the Cold War, then failed to deflate a bubble that became too inflated with deflation and debt.