The economic health of Japan took a hit as the country’s economy index fell for the second consecutive month in February, according to government data released on Friday. This decline comes after Japan narrowly avoided a recession in the fourth quarter of last year.
The government downgraded its assessment of the index for the first time in three years, highlighting the fragile nature of Japan’s recovery. The coincident indicator index, which measures the current state of the economy, dropped by 1.2 points in February to 110.9.
The decrease in the index was attributed to a slump in exports and factory output, indicating the widening impact of disruptions in auto production. Japan’s factory output unexpectedly fell in February due to disruptions at major automakers like Toyota Motor and Daihatsu.
Additionally, weak consumption due to rising living costs and stagnant wage growth has further dampened economic prospects. Some analysts predict that Japan’s economy may have contracted in the first quarter of this year.
Despite these challenges, Bank of Japan Governor Kazuo Ueda remains optimistic, stating that the recent weakness is likely temporary. He reiterated the central bank’s view that the economy is recovering moderately.
The revised fourth-quarter GDP figures showed a positive 0.4% annual growth rate, averting a technical recession. However, the recent data suggests that Japan’s economic recovery may face headwinds in the coming months.