Japan's GDP fell into negative territory in the first quarter

According to the preliminary statistical results released by the Japanese Cabinet Office on May 16, recently, statistics released by the Japanese Cabinet Office show that Japan's real gross domestic product (GDP) in the first quarter of 2024 fell 0.5% quarter-on-quarter, an annualized decline of 2.0%, and negative growth again after turning positive in the fourth quarter of last year. There are comments that the contraction of the Japanese economy is "squeezed by weak consumption and external demand."

What accounts for Japan's negative GDP growth? The author summarized the following factors.

First, the contribution of both domestic and external demand to Japan's economic growth is negative. In terms of domestic demand, personal consumption fell by 0.7% quarter-on-quarter, showing a weakening of domestic consumption demand for four consecutive quarters of negative growth. In addition, business investment in equipment and private residential investment also fell 0.8 percent and 2.5 percent, respectively, indicating a slowdown in business investment and residential construction. On the external demand side, exports fell by 5.0% quarter-on-quarter, the first decline in four quarters, mainly due to factors such as lower vehicle shipments.

Second, Japan's economy faces longer-term challenges, such as slowing global growth, trade tensions and an aging population. These problems have put enormous pressure on the Japanese economy, limiting its growth potential.

In addition, the depreciation of the yen, while boosting exports and tourism to some extent, also puts pressure on households and small businesses as the cost of imported goods rises. This has further depressed domestic consumption.

Finally, the Japanese government's fiscal policy and monetary policy also have certain limitations, and it is difficult to effectively stimulate economic growth. While government and corporate executives have expressed concern about the weak yen, the impact on the Japanese economy is a two-way street, both positive and negative.

Considering the above factors, it can be seen that there are many reasons for Japan's negative GDP growth. However, local people are more concerned about the economic and social impact of a decline in Japan's GDP.

From an economic perspective, the decline in GDP is a direct reflection of the weak state of the Japanese economy. The decline in domestic and external demand has led to declines in business equipment investment, private residential investment and exports, further aggravating the downward pressure on the economy. At the same time, the Japanese economy is heavily dependent on the external environment, and the rise of international geopolitical risks has also increased the uncertainty of external demand prospects, making the road to recovery of the Japanese economy more difficult.

The impact of falling GDP on Japanese society cannot be ignored. Due to the economic downturn and the decline in corporate profits, the job market is depressed and the unemployment rate is rising, which has brought great troubles to the lives of the Japanese people. In addition, with the aggravation of the aging population, the pressure on social security is increasing, and the financial burden of the government is increasing, which may affect the provision of social welfare and the improvement of public services.

The depreciation of the yen, while boosting exports and tourism to some extent, is also putting pressure on households and small businesses as the cost of imported goods rises, leading to an increase in the cost of living and further depressing domestic consumption. It also makes the Japanese economy more vulnerable to external challenges.

From a global perspective, the decline in Japan's GDP also reflects the trend of slowing global economic growth. As the world's third largest economy, Japan's economic performance has important implications for the global economy. Therefore, the weakness of the Japanese economy may have a certain negative impact on the global economy.

Overall, the decline in Japan's GDP poses serious challenges to the Japanese economy and society. To address these challenges, the Japanese government and businesses should work together to take proactive and effective measures to stimulate economic growth and improve people's well-being. Countries should also pay close attention to the impact of the decline in Japan's GDP, respond to challenges in a timely manner, and promote economic recovery and growth.