Two faltering economies, Germany and Japan, are trying to see the good side of their limp. Japan has officially entered recession, adding two consecutive quarters of contraction. But the Tokyo Stock Exchange has its historical maximum within reach, established in the distant 1989.
Meanwhile, the German economy would avoid the recession, thanks to two miraculously static quarters (0%), which preceded the negative quarter (-0.3%) with which it closed 2023. Something that has not been an obstacle to snatching Japan’s status third largest economy in the world, in dollars.
The assault on the podium almost masks that it is actually a leap backwards, only compensated by Japan’s even greater decline, in two quarters (-0.8% in the penultimate quarter of 2023 and -0.1% in the last , contradicting the predictions of modest growth).
In annualized terms, the contraction of Japanese GDP was 0.4% between October and December, compared to the fall of 3.3% between July and September. Likewise, Japanese household consumption contracted 0.2% in the last quarter, while public investment fell 0.1%.
“We are confident that GDP will recover in the first quarter of 2024,” said Min Joo Kang, economist at ING Research, for whom exports will continue to be the main driver of growth, while private consumption should also improve given the stabilization. of inflation and the expectation of solid wage growth.
There are even those who dispute “that Japan has now entered a recession”, such as Marcel Thieliant, of Capital Economics, who observes that the unemployment rate fell to 2.4% in December, its lowest level in eleven months. The same expert in Asia and Oceania goes so far as to point out that “an upward revision of the GDP for the fourth quarter is still possible”, so he doubts that the recession on paper will prevent the Central Bank from ending its negative interest rate policy. (-0.1%), as it is expected to do in April.
The Berlin government announced in January that its nominal GDP in 2023 amounted to 4.12 trillion euros, equivalent to 4.5 trillion dollars. While Japan’s nominal GDP in 2023 was 591.48 trillion yen, equivalent to 4.2 trillion dollars. In any case, Germany’s surprise had already been predicted in October by the International Monetary Fund (IMF).
It should be noted that the Japanese economy, today the fourth largest in the world, ranked second after the United States for decades, until 2010, when it was surpassed by China. The Indian economy, for its part, with a volume close to 4 trillion dollars, would occupy fifth position, although with a much higher growth rate. Something to predict that, after 2025, it will surpass both Japan and Germany, to occupy third place.
On the other hand, the Nikkei index of the Tokyo Stock Exchange closed this Thursday’s session with an advance of 1.21%, which has allowed it to exceed 38,157 points, its highest level since 1990 and less than 2% of its historical maximum of 38,915 points, reached on December 29, 1989. After the dizzying eighties, when it seemed that Japan was going to take over the world, deflation began, from which it has not yet emerged. Although no less dizzying, in a country with negative rates, it is to think that the Nikkei index accumulates a revaluation of 40% in the last twelve months.
That said, in Germany they are not deceived about their relative progress, while in reality they are going backwards economically, due to the cost of energy and the consequent decline in industrial exports. It’s not even any consolation that the UK has also entered a recession.
It should be added that the population of Japan is larger than that of Germany by almost 50%. So the change in position on the podium has a lot to do with a yen that seems to have bottomed against the US currency. A dollar, which was worth just over 100 yen three years ago, is worth more than 150 today.
This depreciation of Japan’s currency, together with its demographic decline, is giving rise to new phenomena. There are more and more foreigners – many Westerners – who, not being able to afford a home in their countries, venture to buy a house in remote cities and towns in Japan, where there are opportunities for less than thirty thousand euros. Quite a humiliation, in a country that grew up thinking that a single avenue in Tokyo could accumulate a real estate value greater than the GDP of several countries.
The demographic crisis in Japan, which today has 125 million inhabitants, including foreigners, is not new. Its population has been decreasing for fifteen consecutive years. The novelty, however, is that it does so in each and every one of its 47 prefectures.
Another positive aspect of the depreciation of the yen is the sudden competitiveness of Japan’s industrial and even food exports. Exports are increasing modestly, although Japan traditionally includes spending on its territory by foreign tourists.
On the other hand, visits abroad have become more expensive. In this way, Spain received a total of 311,555 Japanese tourists last year. 150% more than in 2022, but half of the 686,091 that arrived in 2019. The expenditure they made was 843 million euros, which, although double that of the previous year, represents 38% less than before the pandemic. .
Finally, the Japanese economic outlook does little to raise the popularity of Fumio Kishida’s government, which is highly regarded by only one in six Japanese, according to polls. The prime minister has the consolation that the “red princess” of North Korea, Kim Yo Jong, sister of Kim Jong Un, has not excluded this Thursday from inviting him to Pyongyang, where he will undoubtedly be able to put his notions of social stagnation into perspective. and economic.
