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Economic News

UK and Japanese Real GDP Contract for the Second Straight Quarter

February 15, 2024
Marc-Antoine Dumont
Senior Economist


  • The United Kingdom’s real GDP shrank a non-annualized 0.3% in the final quarter of 2023 after edging down 0.1% in the previous quarter. Real GDP expanded 0.1% for 2023 as a whole, compared to 4.3% in 2022.
  • Japanese real GDP fell for the second quarter in a row, ticking down 0.1% on a non-annualized basis at the end of 2023. Japan’s economy grew 1.9% for 2023 as a whole, after advancing 0.9% in 2022.


The United Kingdom posted its biggest drop in real GDP since the second quarter of 2009, not counting the COVID-19 pandemic. Economic weakness was relatively broad-based in the fourth quarter, with household spending (-0.1%), government expenditures (-0.3%), exports (-2.9%) and imports (-0.8%) all losing ground. Investment and changes in inventories were the only components that went up at the end of last year. This downshift in the UK economy occurred while inflation remained unchanged at 4% in January. That’s twice as high as the Bank of England’s target. That said, the labour market proved relatively robust, with unemployment dropping from 4.4% in June 2023 to 3.9% in December.


Meanwhile, Japan also recorded the biggest decline in real GDP in nearly 10 years, excluding the pandemic. But the Japanese economy’s problems are mostly related to domestic demand, as the two biggest growth drivers—consumer spending (-0.2%) and investment (-0.3%)—faltered in late 2023. This contrasts with the exterior sector as exports grew 2.7%.


The downturn in Japanese real GDP could complicate future decisions by the Bank of Japan (BoJ). The BoJ’s negative interest rate policy is unique among its peers, since the other major central banks have significantly raised interest rates. It remains concerned that inflation may slip back below 2% over the medium and long term. Observers will nevertheless pay close attention to wage talks at a number of companies this spring. Japan’s biggest union is aiming for a 6% wage hike, compared to the 3.6% increase in 2023. This could boost demand and ramp up inflationary pressures.


Real GDP in the UK and Japan contracted for the second straight quarter, which means both countries are in a technical recession. But the term "recession" is misleading. Talk of a real recession is questionable when the job market remains strong, as we explained in our January 22 Economic Viewpoint External link.. That said, it’s clear that economic conditions have deteriorated in two of the world’s largest economies.

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