Japan lost the symbolic title of the world’s third-largest economy, now held by Germany, in 2023, largely because of the devaluation of its currency, the yen, according to preliminary Japanese GDP data released today.
Japan’s nominal GDP was about 4.2 trillion. dollars, against approximately 4.5 trillion. which was Germany’s; the latter’s increase was mainly attributed to inflation, which was high last year in Europe’s largest economy.
But in real terms (adjusted for inflation and seasonality), Japan’s economy expanded by 1.9% last year, while Germany’s shrank by 0.3%, according to official figures released in Berlin in January.
An exporting powerhouse, Germany has been hit by falling foreign demand, the cost of energy for its large industrial sector, and the European Central Bank (ECB) raising interest rates to control inflation.
The deterioration of the situation means that the new title of Germany, the third largest economy in the world, a development that was discounted in October in its forecasts by the International Monetary Fund (IMF), is perceived as an illusion.
Besides, India may overtake both Japan and Germany in a few years.
In Japan, however, the media extensively commented on the loss of the position of the third largest economy in the world, reminding that beyond the particular impact of the decline in the exchange rate of the yen, there are other negative fundamental factors, such as the journalistic decline in the archipelago and the chronic weakness in terms of productivity.
“After ceding China second place behind the US in 2010, Japan is now also ceding third place,” Japan’s major economic newspaper Nikkei said scathingly in an editorial on Saturday.
“Japan has not made progress in increasing its growth potential. This situation should be a wake-up call to speed up economic reforms that have been neglected,” he added.
Like Germany, Japan is a major industrial and exporting power, but has long been losing momentum, while domestic consumption is undermined by inflation and the yen’s depreciation.
In the fourth quarter, Japanese GDP contracted again (–0.1% in real terms), for the second time in a row, after its much sharper decline in the third (–0.8%, in downwardly revised which was released today).
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