World's No. 2 economy in recession
Japan, the world's second-largest economy, is in a recession, government officials announced. Japan's Cabinet Office confirmed that its economy fell another 0.1 percent in its third quarter, following a 0.3 percent drop in the second quarter. The country's gross domestic product has fallen by 0.4 percent this year.
Japan's recession announcement was not unexpected. Part of the problem is the strong yen, which skyrocketed in recent weeks as turmoil in the world's financial markets and concerns about a global recession drove investors away from high-yielding currencies such as the euro and the pound. As a result, lower-yielding currencies like the dollar and the yen surged in value because they are considered by many investors to be a safe-haven.
Since Japan is such a big exporter of goods, a more robust yen hurts profits for Japanese firms as sales from abroad get translated back into yen. The more that the yen has climbed, the worse Japan's stock market has performed, which has resulted in a ripple effect on European and U.S. exchanges.
- CNN's Junko Ogura
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