Why did Japan lose the title of the world’s third largest economy? international business news
Japan lost the title of world’s third largest economy, Official data released on Thursday showed that Japan was once expected to get the title of the world’s largest country. economy, falling to fourth place behind Germany last year. However, projections indicate that India is poised to overtake both countries to take third place by the end of this decade.
According to AFP, although Japan’s economy grew by 1.9 percent, government data indicated that its nominal gross domestic product (GDP) in dollar terms for 2023 was $4.2 trillion. The figure was less than Germany’s GDP of $4.5 trillion, according to data released there last month.
Economists noted that the change in the rankings was mainly due to the significant decline in the yen against the dollar rather than Germany’s economy, which declined 0.3 percent in 2023, surpassing Japan’s performance.
Read this also UPI for International Payments: Complete list of countries accepting UPI payments; Check how to activate and use
The Japanese currency’s depreciation against the US dollar by about a fifth in 2022 and 2023 has significantly contributed to this change. This decline is partly due to bank of japanA commitment to negative interest rates, intended to stoke inflation. In contrast, other major central banks have opted to raise borrowing costs to address rising inflation rates.
Fitch Ratings economist Brian Coulton was quoted as saying, “The dollar’s … overtaking in size is due to the recent decline in the yen. Japan’s real GDP has actually been outperforming Germany’s since 2019. “
Germany, famous for its export-driven manufacturing industry, has faced constraints posed by increased energy costs following Russia’s invasion of Ukraine. Furthermore, factors such as the European Central Bank raising interest rates, fiscal uncertainties, and a shortage of skilled workers have hindered Germany’s economic progress.
Economic Challenges and Contradictions: Japan vs. Germany
Japan, which is dependent on exports, particularly the automotive sector, has benefited from the weaker yen, which has made its exports more competitive. However, despite this advantage, major companies like Toyota have struggled in key markets like China.
However, Japan faces more significant challenges than Germany, especially in terms of labor shortage due to this declining population And low birth rate. Economists predict that this disparity between the two economies will increase.
Recent data indicated Japan’s economy shrank 0.1 percent quarter-on-quarter in the final three months of 2023, falling short of market expectations of 0.2 percent growth. Additionally, third quarter growth was revised down to negative 0.8 percent, indicating that Japan experienced a technical recession in the latter half of 2023.
Read this also Indian economy in strong position! Business activity grew at fastest pace in four months – PMI data shows
“Like Japan, Germany’s population is declining, but it has still made steady gains,” said Toshihiro Nagahama, an economist at Dai-ichi Life Research Institute. Economic Development,
He added, “This is because, especially since the 2000s, government officials in Germany have been actively implementing policies to create an environment that makes it easier for companies to operate in the country.”
Japan’s economic journey: challenges and reforms
Japan was predicted to become the world’s largest economy in the 1970s and 80s. However, the bursting of Japan’s property bubble in the early 1990s led to several years of economic stagnation and deflation, known as the “lost decade”.
By 2010, Japan was overtaken by China as the second largest economy, leading to consideration of Japan’s economic trajectory. Although affected by the yen’s decline, falling behind Germany will hurt Japan’s confidence and put pressure on Prime Minister Fumio Kishida, the report said.
According to the International Monetary Fund, further challenges lie in wait as India is expected to overtake Japan in production by 2026 and Germany by 2027.
According to Natixis economist Alicia Garcia-Herrero, Germany and Japan are contributing less to global growth because their productivity is already high and difficult to increase.
García-Herrero was quoted as saying “Of course, both Germany and Japan can take measures to reduce it. The most obvious measures are to allow more immigration or to increase the fertility rate.”
Japanese financial daily Nikkei said Japan has not made progress in increasing its growth potential. The Nikkei editorial emphasizes the need for Japan to accelerate economic reforms in response to this situation.
According to AFP, although Japan’s economy grew by 1.9 percent, government data indicated that its nominal gross domestic product (GDP) in dollar terms for 2023 was $4.2 trillion. The figure was less than Germany’s GDP of $4.5 trillion, according to data released there last month.
Economists noted that the change in the rankings was mainly due to the significant decline in the yen against the dollar rather than Germany’s economy, which declined 0.3 percent in 2023, surpassing Japan’s performance.
Read this also UPI for International Payments: Complete list of countries accepting UPI payments; Check how to activate and use
The Japanese currency’s depreciation against the US dollar by about a fifth in 2022 and 2023 has significantly contributed to this change. This decline is partly due to bank of japanA commitment to negative interest rates, intended to stoke inflation. In contrast, other major central banks have opted to raise borrowing costs to address rising inflation rates.
Fitch Ratings economist Brian Coulton was quoted as saying, “The dollar’s … overtaking in size is due to the recent decline in the yen. Japan’s real GDP has actually been outperforming Germany’s since 2019. “
Germany, famous for its export-driven manufacturing industry, has faced constraints posed by increased energy costs following Russia’s invasion of Ukraine. Furthermore, factors such as the European Central Bank raising interest rates, fiscal uncertainties, and a shortage of skilled workers have hindered Germany’s economic progress.
Economic Challenges and Contradictions: Japan vs. Germany
Japan, which is dependent on exports, particularly the automotive sector, has benefited from the weaker yen, which has made its exports more competitive. However, despite this advantage, major companies like Toyota have struggled in key markets like China.
However, Japan faces more significant challenges than Germany, especially in terms of labor shortage due to this declining population And low birth rate. Economists predict that this disparity between the two economies will increase.
Recent data indicated Japan’s economy shrank 0.1 percent quarter-on-quarter in the final three months of 2023, falling short of market expectations of 0.2 percent growth. Additionally, third quarter growth was revised down to negative 0.8 percent, indicating that Japan experienced a technical recession in the latter half of 2023.
Read this also Indian economy in strong position! Business activity grew at fastest pace in four months – PMI data shows
“Like Japan, Germany’s population is declining, but it has still made steady gains,” said Toshihiro Nagahama, an economist at Dai-ichi Life Research Institute. Economic Development,
He added, “This is because, especially since the 2000s, government officials in Germany have been actively implementing policies to create an environment that makes it easier for companies to operate in the country.”
Japan’s economic journey: challenges and reforms
Japan was predicted to become the world’s largest economy in the 1970s and 80s. However, the bursting of Japan’s property bubble in the early 1990s led to several years of economic stagnation and deflation, known as the “lost decade”.
By 2010, Japan was overtaken by China as the second largest economy, leading to consideration of Japan’s economic trajectory. Although affected by the yen’s decline, falling behind Germany will hurt Japan’s confidence and put pressure on Prime Minister Fumio Kishida, the report said.
According to the International Monetary Fund, further challenges lie in wait as India is expected to overtake Japan in production by 2026 and Germany by 2027.
According to Natixis economist Alicia Garcia-Herrero, Germany and Japan are contributing less to global growth because their productivity is already high and difficult to increase.
García-Herrero was quoted as saying “Of course, both Germany and Japan can take measures to reduce it. The most obvious measures are to allow more immigration or to increase the fertility rate.”
Japanese financial daily Nikkei said Japan has not made progress in increasing its growth potential. The Nikkei editorial emphasizes the need for Japan to accelerate economic reforms in response to this situation.
