Overview
Japan's economy is currently grappling with multiple significant challenges, including economic stagnation, currency weakness, inflation concerns, and public debt. Despite these issues, the Japanese stock market has been performing exceptionally well, creating an apparent paradox. This report provides an analysis of these dynamics, highlighting the factors driving the stock market and the potential risks involved.
Economic Challenges
Economic Stagnation and Recession:
Japan's economy has been struggling with low growth for decades. In 2023, Japan's GDP was surpassed by Germany's, making Japan the world's fourth-largest economy (The Diplomat, 2024). The country is currently in a recession, with private consumption and business investment dropping by 0.4% and 0.1%, respectively, in the last quarter of 2023 (AEI, 2024; Deloitte, 2024).
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