Japan enters recession as households and companies spend less

GDP falls for a second quarter against market expectations

Japan's economy unexpectedly slipped into recession after shrinking for a second quarter due to anaemic domestic demand, prompting some central bank watchers to push back bets on when the nation's negative interest rate policy will end.

Gross domestic product shrank at an annualised pace of 0.4 per cent in the final three months of 2023, following a revised 3.3 per cent contraction in the previous quarter, the Cabinet Office reported on Feb 15.

The report showed both households and businesses cut spending for a third straight quarter as Japan's economy slipped to fourth-largest in the world in US dollar terms in 2023. Germany now has the world's third-largest economy.

Only one of 34 surveyed economists had pointed to a contraction in the quarter, with the consensus at 1.1 per cent growth.

The weaker-than-expected result will complicate the Bank of Japan's (BOJ) case to conduct the first rate hike in Japan since 2007, a step most economists surveyed in January predicted the bank would take by April.