Japan's Economy Slips into Recession, Losing Third-Largest Economy Spot

Japan's economy unexpectedly slipped into a technical recession as it contracted 0.4% in the October-December period, driven by high inflation crimping domestic demand and private consumption. This complicates the case for interest rate normalization and fiscal policy support, and also led to Germany overtaking Japan as the third-largest economy in the world. The weaker-than-expected GDP print suggests that high inflation is hurting domestic consumption, potentially strengthening the case for looser monetary policy for much longer.