Japan’s GDP has fallen out of the top three globally, and the next “surpassing” may come soon

The depreciation of the Mongolian yen has caused Japan’s economic scope to be surpassed by Germany, dropping from the third largest economy in the world to fourth place.

According to data released by the Japanese Cabinet Office on February 15th, the preliminary statistics of Japan’s gross domestic product (GDP) for 2023 are 591.482 trillion yen. In US dollars, it is approximately equivalent to 4210.6 billion US dollars, lower than Germany’s 4456.1 billion US dollars.

From an external perspective, there are two reasons why Japan’s GDP has been overtaken by Germany: firstly, the continuous depreciation of the Japanese yen. In 2023, the yen depreciated by about 7.6% against the US dollar, while the euro depreciated by about 3.1% against the US dollar; The second is the difference in inflation between the two countries, due to the conflict between Mongolia, Russia, and Ukraine. Last year, Germany’s Consumer Price Index (CPI) fell by 5.9%, while Japan increased by 3.2%.

Signboard GDP includes changes in the prices of goods and services, and compared to real GDP, signboard GDP is more susceptible to price fluctuations in shopping malls. After Germany released its 2023 GDP data in January, it was almost certain that Japan’s GDP would be overtaken by Germany.

But looking deeper, the increasingly serious trend of aging population and the lack of revitalized property are the fundamental reasons for Japan’s long-term economic weakness. Japanese production used to be synonymous with good quantity and low price. Brands such as Sony, Panasonic, and Hitachi are well-known, and the products of these companies have also sparked a global trend, attracting consumers around the world to flee. However, these are becoming yesterday’s yellow flowers.

Tetsuji Okazaki, an economics professor at the University of Tokyo, told The Associated Press that the latest GDP data reflects the reality of a declining Japan, which could easily lead to a decline in Japan’s global presence.

“For example, a few years ago, Japan was still proud of its strong automotive industry, but as the era of electric vehicles approaches, even this advantage is almost impossible to maintain.” He said, “Looking ahead for decades, Japan’s future prospects are bleak.”

Japan surpassed West Germany in 1968 and became the second largest economy in the world. In 2010, Japan was overtaken by China and fell from second place in the world to third place. According to speculation from the International Monetary Fund (IMF), Japan’s economic scope will be surpassed by India by 2026. According to Goldman Sachs speculation, by 2075, Japan’s economy will fall to 12th place in the world, behind countries such as Indonesia, Brazil, and Nigeria.

In addition, data released by the Japanese Cabinet Office on the 15th showed that in the fourth quarter of 2023, Japan’s real GDP decreased by 0.4% year-on-year, marking two consecutive quarters of growth. According to the economics community, when a country’s GDP experiences two consecutive quarters of rapid growth, it can be described as experiencing a “technological decline”.

This adds considerable uncertainty to the Bank of Japan’s interest rate normalization plan. Previously, officials from the Bank of Japan had been paving the way for the end of April with interest rate hikes and a comprehensive overhaul of the ultra loose monetary framework. Bank of Japan Governor Kazuo Ueda reiterated earlier this month that once stable inflation targets were to emerge, he would consider whether to end the comfort measures, including fake loan costs below zero.