For the first time in more than a decade, the top three largest economies in the world are changing. The US and China remain the largest, but Japan loses third place to our eastern neighbors. This is evident from figures from the International Monetary Fund (IMF).
Viewed as a whole, the Japanese economy still grew by 1.9 percent, but that is entirely due to the first half of the year. In the third quarter, GDP shrank at a rate of 3.3 percent per year, and in the final quarter at a rate of 0.4 percent.
Economists point to the increasing aging population in the country, which has caused a decline in the population for years. As a result, many jobs are left unfilled, which also translates into lower production. Domestic demand in Japan is also under pressure. Both companies and households are paying more attention to their spending patterns due to persistent price increases. Windfalls such as the export of cars and chips and the growth of tourism in Japan cannot completely wipe out that effect.
To make matters worse, the yen also took a hard hit last year. Expressed in dollars, there was a drop of 7 percent. In two years’ time there will even be a decline of about a fifth. As a result, the GNP amounts to 4.2 trillion dollars.
That’s less than Germany’s $4.55 trillion. Ironically, there is also an economic contraction in Germany: last year’s GDP fell by 0.3 percent.
Germany is being helped by high inflation. Although the peak of rapid price increases dates back to 2022, the offshoots also made themselves felt strongly in our eastern neighbors last year. Unlike Japan, there is no population decline in Germany.
The chairman of the German Bundesbank announced on Wednesday that the recession in the country may not be over yet. In the first quarter the economy will “at best stagnate”. Germany is still counting on growth of 0.2 percent for the entire year of 2024.
Largest countries
However, despite the sluggishness of the German economy, Japan is not expected to overtake Germany again. Economists expect that sometime in the coming years India will rise among the largest economies, and Japan will fall further.
Until 2012, Japan was the second largest economy after the US, but China then surpassed its neighbor. Japan experienced strong growth after the Second World War and continued to grow until the 1980s. Growth has been much more limited over the past thirty years.
Great Britain also announced on Thursday that it has sunk into recession. In the final quarter of 2023, there was an economic contraction of 0.3 percent, compared to 0.1 percent in the previous quarter.
