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Unpleasant Surprise For The Japanese Economy

Unexpectedly, after falling 0.8% in the third quarter, Japanese economic activity fell another 0.1% in the last three months of last year. This is due to lower household consumption, investment and public spending.

By EC Invest

The Japanese economy’s usual weak spot, domestic demand, has declined in the last three quarters. The export boom, up 2.6% at the end of last year compared to the previous three months, has not fully offset the internal weaknesses of the Japanese economy.

The poor GDP figures at the end of last year raise several questions, especially for the central bank. The Bank of Japan wants to start normalising its monetary policy this year and increase its rate to -0.10% today. But will inflation, currently at 2.6%, remain in line with the objective of an annual price increase of 2% in the coming months with depressed domestic demand?


Everything will depend on the wage negotiations between the bosses and the unions next spring. Raising wages sharply, as expected, will stimulate household consumption, which represents half of GDP, and the risk of a return to deflation will be ruled out.

The Japanese economy will thus resolutely enter a new favourable economic era.

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