Germany could overtake Japan as the world’s third-largest economy in 2023. The suggestion comes amid a slump in the yen against the dollar and the euro. Germany’s nominal gross domestic product is estimated at $4.43 trillion this year, compared with $4.23 trillion for Japan, according to the latest International Monetary Fund forecasts.
The yen is hovering near the ¥160 mark against the euro and remains at a 33-year low against the dollar.
The weak currency is largely caused by fundamental differences in monetary policy. The Federal Reserve and the European Central Bank have raised interest rates and from record low lows, they are now at the other extreme. The ECB and Fed want to tackle inflation this way, while the Bank of Japan remains in stimulus mode, seeking to fuel price growth after years of deflation.
While the Fed and ECB are expected to keep interest rates unchanged, expectations that borrowing costs will remain higher for longer are likely to keep pressure on the yen. At the same time, in Japan, the end of the negative interest rate is not expected to come even until next year, writes Bloomberg.
Meanwhile, the figures point to more robust long-term growth in Germany, which will prompt policymakers in Japan as they consider their latest “economic package”.
A second recession threatens Germany by the end of the year
The German economy will shrink this year
“It really seems that Japan’s growth potential is declining,” commented Japan’s Economy Minister Yasutoshi Nishimura on the IMF’s forecasts. “We want to regain our status, which has been lost over the last 20 or 30 years. We want to achieve this through measures like our upcoming economic stimulus package.”
According to Prime Minister Fumio Kishida, it includes expanding energy subsidies, measures aimed at easing a cost-of-living crisis caused by Japan’s strongest inflation in decades. He said it would be necessary to ensure that upward momentum in wages remains in place, as well as tax cuts.
IMF data shows Germany’s per capita gross domestic product is forecast at $52,824, compared to Japan’s $33,950.
2023-10-24 14:00:48
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