The Cause Of Japan's Recession And Its Effects On The Indonesian Economy

YOGYAKARTA - Japan and Britain are in danger of experiencing a recession due to unexpected economic contractions. These concerns arose after the Gross Domestic Product (GDP) of the two countries experienced a decline. Many economies highlight the causes of Japan's recession and its effects on Indonesia.

Japan began to fall into a recession after falling from the position of the country with the third-largest economy in the fourth quarter of 2023. One of the developed countries in Asia experienced a decline in GDP by 0.4 percent. So what is the cause of Japan's recession and what is the response of economic experts?

The Japanese Ambassador to Indonesia, Masaki Yasushi, revealed the reason why Japan fell into an economic recession. Ambassador Masaki said that his country had experienced prolonged deflation pressure. In addition, the issue of salaries that did not experience an increase is also a critical problem in the country of the timpy.

Masaki revealed that Japan continues to encourage cooperation with major trading partner countries to revive its economy. One of the countries in question is Indonesia.

"We need to give strength to our economy. We need cooperation, exchange, trade with friendly countries," said Masaki on the sidelines of the Emperor's Birthday reception in Jakarta on Wednesday (21/2).

Japan's cabinet office reported that GDP contracted up to 0.4% in the fourth quarter of 2023. Previously, the country's GDP also contracted by 3.3% in the third quarter of 2023.

Minister of Finance, Sri Mulyani Indrawat, also responded to the recession that hit Japan in early 2024. Minister of Finance Sri Mulyani assessed that the Japanese economic crisis was triggered by a reference interest rate that was still quite high and was predicted to last a long time.

"So it will definitely affect their economic performance, which causes why projections and economic outlooks for many countries, especially the G7, yes, in that case, it will tend to weaken and it will be a challenge for our global environment," said Sri Mulyani.

Furthermore, Sri Mulyani also believes that there are war factors in various regions that have not stopped, thus affecting the global economy.

"Foreign countries, as mentioned earlier, have experienced a recession, yes, they are already quite weak, either because of the war in Ukraine that affects mainly Europe, but also Japan and Europe will generally also be affected by economic policies, especially interest rates," said Sri Mulyani.

The economic recession that occurred in Japan is also said to have an effect on Indonesia. The Coordinating Minister for Economic Affairs, Airlangga Hartarto, assessed that the Japanese recession would bring benefits to the country.

In terms of investment, investor behavior patterns will usually move from countries whose economy is slowing down to switch to countries that still have high economic growth. Indonesia and a number of ASEAN countries are expected to be aimed at investors when a number of developed countries are slumping.

"Well, they will see that one of the regions that can grow is ASEAN, so with a recession there I hope that investment from there will flow more," said Airlangga Hartarto.

In addition, Airlangga also reminded that the government remains vigilant considering that Japan is Indonesia's main export destination country. Airlangga together with the National Export Increase Task Force have set 12 priority countries for Indonesia's export destinations.

This step was taken as a strategy in maintaining Indonesia's trade balance in the face of global dynamics. There are 12 priority countries for the purpose of Indonesia's exports, namely Saudi Arabia, China, India, the Netherlands, Brazil, the Philippines, Chile, Kenya, South Korea, the UAE, Mexico, and Vietnam.

Such is the review of the causes of Japan's recession and its effects on Indonesia. The economic recession experienced by Japan has made partner countries and investors reorganize global economic strategies. Also read also Japan strengthens cooperation with Indonesia in the midst of a recession.

Stay up to date with the latest domestic and other overseas news on VOI. We present the latest and most updated nationally and internationally.