Japan is technologically much more advanced than other countries in the world. Japan is known for its phenomenal leap in robotics and other automation technologies. But recently, the country has been struggling with the global recession and exponential growth in the Dollar’s value compared to other currencies. During the third quarter of 2022, Japan’s economy shrunk for the first time, creating significant tension in the Japanese population as the global recession is going to get worse. Due to the strengthened Dollar, the Japanese Yen has significantly weakened, creating problems for the locals to import goods for residential and industrial needs.
Japan is the third largest economy in the world, after the US and China. Due to various factors such as the Russia-Ukraine war, the COVID-19 pandemic, the global economic slowdown, and the increasing import expenses, the country’s economy has been impacted negatively. Japan is not a gifted country when it comes to natural resources. It lacks the necessary resources such as oil, coal, iron ore, copper, aluminum, wood, and other raw materials needed for industrial growth. Because of this, Japan is highly dependent on imports of these natural resources from various countries. But besides this, Japan mainly imports food products from other countries. Japan imports almost 60% of its food products from other countries. Because of this, food products have become expensive in Japan.
The war between Russia and Ukraine has worsened this for the country. Japan supported Ukraine in the Russia-Ukraine war, as it said that the Russian forces are breaking international humanitarian law and war crimes by mass killing of civilians in Ukraine. Japan’s stand in favor of Ukraine has resulted in Russia halting the oil supplies to Japan. All these conditions have caused the Japanese Yen to fall to 32-year lows against the US Dollar. Because of this, the prices for daily use items such as fuel, food, and other necessities. Many economic experts in the country have blamed the imports for causing the downfall of Japan’s economy.
The contraction of the Japanese economy can be viewed as the starting point for the global recession as the global economy is moving towards a similar situation. Japan heavily relies on private consumption, so much so that it is considered the backbone of the Japanese economy. During the third quarter, private consumption grew by 0.3%, significantly lower than the growth in the second quarter. Economists are expecting the Japanese economy to recover during the fourth quarter due to tourism and increasing trade. But this growth is expected to be shunted a little due to the possibility of an eighth COVID-19 wave. The country has witnessed a growth in industrial investment along with the growth in exports, which are expected to contribute to the growth in the fourth quarter. Meanwhile, the Japanese government has stood in the support of their people with the funding of 29 trillion yen or US $206 billion. Along with this, the Bank of Japan has implemented its monetary stimulus program to support households and businesses during inflation. 2023 will be a tough year for Japan and the rest of the world, as it will decide the fate of their economies.