Japan’s Slips into an Economic Downturn: Here’s the why and what is to be done!

Japan’s economy, the world’s third-largest, contracted at an annual pace of 2.1% in the third quarter of 2023. This contraction, marked by weakened consumption and investment, represents a significant downturn from previous quarters. Notably, private consumption shrank by 0.2%, and corporate investment fell by 2.5%. Experts, including Marcel Thieliant of Capital Economics, foresee a continued slowdown, with GDP growth projected to drop from 1.7% this year to 0.5% in 2024.

In response, Prime Minister Fumio Kishida has unveiled a stimulus package exceeding 17 trillion yen to support low-income households and counter surging prices. The package includes tax breaks and benefits, aiming to revive the economy amidst global inflation and a weakening yen.

Despite earlier recoveries in tourism and exports, Japan faces enduring challenges, including an aging population and deflation. The Bank of Japan maintains its super-easy monetary policy, indicating that interest rate hikes are unlikely in the near future.

THINK LIKE AN ECONOMIST!

Q1. Define ‘economic contraction’.

Q2. Explain the impact of weak consumption and investment on Japan’s economy.

Q3. Analyse the expected outcomes of Prime Minister Kishida’s stimulus package.

Q4. Discuss the long-term challenges faced by Japan’s economy, such as deflation and an aging population.

Click here for the source article

TheCuriousEconomist

Recent Posts

U.K. Government Seizes Control of British Steel Plant

It’s a dramatic move—but one the U.K. government believes is essential for national economic security.…

4 days ago

U.S. Tariffs on China Surge Past 100% as Trump Escalates Trade War – but why?

A new chapter in the U.S.-China trade war is unfolding—and it’s one that economists fear…

1 week ago

Can Defense and Housing Turn the Tide on Sluggish GDP Growth in the UK?

The U.K. economy is still stuck in low gear. The Office for Budget Responsibility (OBR)…

3 weeks ago

PepsiCo Plans $1.95 Billion Poppi Acquisition

PepsiCo is planning to acquire prebiotic soda brand Poppi for $1.95 billion, marking a major…

1 month ago

South Africa Unveils $54.5 Billion Infrastructure Plan to Boost Growth

South Africa has announced a three-year, 1 trillion rand ($54.5 billion) public infrastructure plan aimed…

1 month ago

Canada Pulls U.S. Alcohol from Shelves in Retaliation for Trump Tariffs

The U.S.-Canada trade war is spilling over—literally. In response to Trump’s 25% tariffs on Canadian…

1 month ago