Japan Moves to Fourth Position in World’s Largest Economies
There is evidence that Germany has overtaken Japan to become the third largest global economy after the USA and China, even despite being in a serious crisis itself. Meanwhile, India is nipping at its heels
Despite the crisis of the “Locomotive of Europe,” Germany overtook Japan in the ranking of the world’s largest economies in 2023. The overtaking was already expected at the end of 2023 by the International Monetary Fund, and now Japanese media are confirming the downgrade, “which reflects the impact of currency weakness and demographic aging,” the Japan Times reported.
Tokyo’s economy returned to 1.2% annualized growth in the fourth quarter of 2023 after a downturn in summer, and data collected by Japanese institutions “will almost certainly show output lower than Germany’s in dollar terms.” Japan’s nominal GDP is expected to be about $4.23 trillion in 2023, down 0.2 percent from a year earlier, compared with Germany’s $4.43 trillion.
“‘Cheap’ Japan makes the Japanese economy smaller,” Hideo Kumano, an economist at the Dai-Ichi Life Research Institute, explained to Japan Times. “Japan has become the lone loser, sinking below Germany, which has great difficulties in terms of actual conditions.”
According to the IMF, Japan’s economy has shrunk – in dollars – from 6300 billion in 2012 to about 4200 billion in 2023. This fact is largely due to the weakness of the currency, which has fallen from 80 yen per dollar to over 140. Along with this, there is a “structural” cause, namely the aging of the population.
Meanwhile, the Indian economy may overtake Japan and Germany in the coming years, as both economies have a steadily aging population, lack of natural resources, and dependence on automobile exports. New Delhi is expected to overtake Tokyo in 2026 and Berlin in 2027. In India, the demographic dynamics are the opposite: the country has just overtaken China to become the most populous country in the world with over 1.4 billion people.
A bit of history behind this ranking of world economic powers: in 1968, Japan overtook then-West Germany to become the second power in GDP, a position it maintained until 2010 when it was overtaken by China.
Japan is attempting to respond to global economic challenges by encouraging large investments in high technology, especially in semiconductor manufacturing. Moreover, while the German economy is sending very disappointing signals, the Japanese economy seems to be going through a new phase of vitality: the stock market is rising, and the central bank is expected to raise interest rates for the first time since 2007.