Economy Germany overtakes Japan as third-largest economy

[thomas]

It's official: Germany has overtaken Japan, which now ranks as the world's fourth-largest economy. Japan's economic demise has been attributed to a weak yen and the country's ageing, shrinking population. Also official: Japan has slipped into a recession just like the UK.

Japan's economy, now the world's fourth-biggest, grew 1.9% in 2023 in nominal terms – meaning it is not adjusted for inflation – but in dollar terms, its gross domestic product (GDP) stood at $4.2tn compared with $4.5tn for Germany. The shift, coming more than a decade after it ceded second place to China, has been attributed to the yen's sharp falls against the dollar over the past two years. A weaker yen eats into profits on exports when earnings are repatriated. The Japanese currency dropped by almost a fifth against the US dollar in 2022 and 2023, including a 7% fall last year." [...] Like Japan, Germany is resource-poor, has an ageing population and is heavily dependent on exports. Europe's biggest economy has also been shaken by rising energy prices caused by Russia's war in Ukraine, rising eurozone interest rates, and a chronic shortage of skilled labour. While Japanese carmakers and other exporters have benefited from a weak yen – which makes their goods cheaper on the international market – the country's labour crunch is worse than Germany's, and it is struggling to address a low birthrate. The failure of government-led attempts to boost the birthrate means chronic labour shortages are expected to worsen, even as the country welcomes a record number of foreign workers. The economy revitalisation minister, Yoshitaka Shindo, told reporters that Germany leapfrogging Japan showed it was "imperative" to promote structural reforms, including getting more women into full-time work and lowering the barriers to foreign investment.

Japan loses crown as world’s third-largest economy after it slips into recession

Fall in rank below Germany has been attributed to a weak yen and country’s ageing, shrinking population

www.theguardian.com

 

[thomas]

Japan's economy may have dropped to #4 (and will soon be overtaken by India's), but there's also good news: the country's growth rate has surpassed China's for the first time in almost half a century. The 2023 growth rates reversed due to deflationary pressure from housing and employment slumps.

Japan's nominal growth rate overtook China's for the first time since 1977, according to preliminary 2023 GDP figures released by Japan's Cabinet Office on Thursday. Its economy showed nominal growth of 5.7%, while China's grew by 4.6%. The surprising reversal took place as Japan is starting to turn inflationary, while China is experiencing deflationary pressure. China's economy grew 5.2% in real terms. Real growth accelerated from the previous year, partly due to a rebound from the 3% growth in 2022, when the economy slumped sharply due to China's zero-COVID policies. However, the nominal growth rate -- which takes into account inflation -- slowed to 4.6% in 2023 from 4.8% the year before.

Paywall alert:

Japan's nominal GDP outgrows China's for first time in 46 years

2023 growth rates reverse due to deflationary pressure from housing, employment slumps

asia.nikkei.com

 

[HJain]

India will soon surpass Japan and Germany. But that has been overdue as for a continuous duration of nearly 1,700 years from the year 1 CE, India was the world's largest economy (before it was invaded and ruled for hundreds of years), constituting 35 to 40% of the world GDP (One of the sources: Wikipedia)

However, that is beside the point, and I would not be pessimistic about Japan just because of this drop to the 4th level in USD terms (there are some other reasons, though ).

1 USD was circling around 100 JPY sometime back, and now it's not just hitting 150 but trying to win over that 150 level (I hope it does not). So, there is a straight drop of 33% in the GDP levels just because of the currency conversion rate.

Moreover, the strengths of currency are more or less independent of the state of economies. Economies have much stronger backbones than the relative value of currencies to the USD... And, the sign wave of the currency movement or the cyclic nature of life, in general, may soon color the same picture with different colors