Home » Will Japan’s GDP exit from negative interest rates be delayed due to Germany’s overtaking? _Rolling News_Finance_Securities Star

Will Japan’s GDP exit from negative interest rates be delayed due to Germany’s overtaking? _Rolling News_Finance_Securities Star

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Japan’s GDP is Overtaken by Germany and its Exit from Negative Interest Rates Will Be Postponed

Japan is no longer the world‘s third-largest economy, losing that position to Germany as its GDP unexpectedly dropped after shrinking for the second consecutive quarter. Zhitong Finance APP reported that this development has led to a postponement in the earlier expectations for when Japan’s negative interest rate policy will end.

The preliminary report released by the Japanese Cabinet Office revealed that Japan’s real gross domestic product (GDP) decreased by 0.4% in the fourth quarter of last year. This economic contraction was attributed to sluggish domestic demand, which prompted Japanese households and businesses to cut spending for the third consecutive quarter.

This decline in Japan’s economic aggregate pushed it down to the fourth position in the world rankings, allowing Germany to overtake and become the world‘s third-largest economy. The International Monetary Fund also expects that India’s economy will surpass both Japan and Germany in the coming years.

The unexpected recession comes as Japan struggles with rising living costs, leading to a decline in private consumption. The impact of inflation on consumers’ purchasing power has resulted in weak consumption, with household spending falling for ten consecutive months. Business spending has also been sluggish.

The decline in Japan’s consumption has raised concerns among economists, casting doubt on whether the Bank of Japan will follow through on its decision to quickly abandon its current policy stance.

Furthermore, with some of its major trading partners expected to experience slower growth, Japan’s central bank anticipates that external demand may no longer be a reliable source of support for economic growth in 2024.

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The unexpected contraction in Japan’s GDP has also raised questions about the possibility of the Bank of Japan raising interest rates in March. Economists believe that the weaker-than-expected results will complicate the bank’s case for raising interest rates for the first time since 2007. There are now doubts about whether the Bank of Japan will follow through on its earlier decision to exit the negative interest rate policy.

Overall, the economic challenges Japan faces, along with the potential impact of escalating costs and exchange rates, suggest that the country’s exit from its negative interest rate policy could be further postponed.

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