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Germany overtakes Japan as third-largest economy

Japan's economy slipped into recession, shrinking at an annualized pace of 0.4% in the last quarter of 2023, following a 3.3% contraction in the previous quarter, leading to the country being overtaken by Germany as the world's third-largest economy. Weak domestic consumption, heightened by higher prices for essentials due to a depreciating yen, was a key factor. Despite this, Japan's export sector, buoyed by the weak yen, showed positive growth. The technical recession has not dampened market optimism, with the Nikkei 225 showing significant gains. Economists predict a rebound in GDP for the first quarter of 2024, driven by stabilization in inflation, wage growth, and strong corporate earnings. Meanwhile, Japan's equity market has outperformed in Asia, with a 28% increase in the Nikkei index in 2023, reflecting confidence in ongoing corporate reforms and the benefits of a weaker yen for exporters.


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