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Tuesday, April 16, 2024

Japan’s economy is shrinking again. “I don’t like this gradual decline”

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Although the Japanese are a nation known for their discipline and work ethic, the Japanese economy is shrinking again. Government data points to a technical recession. After decades of stagnation, Japan fell off the podium of the world’s three most powerful economies, giving way to Germany. India may soon overtake it.

Japan’s GDP has declined for two quarters in a row, in what economists call a technical recession. – Our GDP shows that economic growth is very weak. We went through a recession in 2018 and 2012, and then we had two quarters in a row of losses, says Hideo Kumano, chief economist at the Dai-ichi Institute.

Although the Japanese recession is only technical in name, the Japanese feel the bad economic situation. They limit expenses, and this affects entrepreneurs’ profits. – Of course we feel it. Customer habits are changing. Previously, people came to my store with ready-made shopping lists prepared according to what they wanted. Now they come without lists and see what is on sale, explains Hiromichi Akiba, the store owner.

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This may completely derail the current policy of the Bank of Japan, which has been the only one in the world to maintain negative interest rates so far. According to this concept, consumption was to be the driving force of economic growth. However, the Japanese stopped buying. – My salary decreased, so I stopped buying so many clothes and limited eating out, explains Risa Shinkawa, a resident of Tokyo. – Even if the economy recovers, salaries will be a problem. They don’t seem to be keeping up with prices, says Shinjiro Shirahama, a resident of Tokyo.

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A glimmer of hope

Japan is a very specific economy. The country is still suffering from the consequences of the crisis of the early 1990s, which resulted in the so-called lost decade – a long period of stagnation of the Japanese economy. The initially planned 10 years extended to over twenty. Despite this, Japan remained a strong player in the global market. However, now the economic slowdown has led to Japan losing its position as the world’s third economy to Germany. – In my opinion, the fact that Japan has dropped to fourth place in the ranking of world economies is a more serious matter than we initially assumed. The reason is the unfavorable balance of trade and the historically low yen rate. These are the reasons why Germany overtook Japan, says Hideo Kumano.

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For the Japanese, falling off the podium is also a matter of image. Japan was the world’s second economy from 1967 to 2010, when it was pushed to third place by a surging China. – I don’t like this gradual decline of Japan. It’s a great pity, admits Nao Sasaki, a resident of Tokyo.

However, not all forecasts are negative. The fall in the value of the yen led to interest in exported goods such as cars and electronics. The main index of the Tokyo Stock Exchange, the Nikkei 225, reached its highest level since 1990.

Author:Szymon Kazimierczak

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Main photo source: Reuters

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