Japan drops to fourth world economy in 2023, overtaken by Germany – Observer

Last year, Japan lost the symbolic title of third largest economy in the world to Germany, mainly due to the fall of the yen, according to preliminary data on Japanese gross domestic product (GDP) published this Thursday.

In 2023, Japan’s nominal GDP amounted to 591.5 billion yen (3.67 billion euros), compared to 4.12 billion euros in Germany, whose nominal GDP was driven by inflationwhich remained high in the country last year.

But in real terms, i.e. Excluding inflation, Japanese GDP accelerated last year (+1.9%, against 1% in 2022), while the German economy contracted by 0.3%according to official data published in January.

An exporting powerhouse, Germany is suffering from weak external demand, energy costs for the large industrial sector and the rise in interest rates by the European Central Bank in an attempt to beat inflation.

German economy surprises positively, with bets that ECB will lower interest rates

The worsening of Germany’s economic situation means that the new title of third world economic power, expected since forecasts by the International Monetary Fund made in October, is seen as an illusion.

All the more so because, within a few years, India could overtake Japan and Germany.

In Japan, the local media widely commented on the country’s loss of position as the third largest economy in the world, highlighting that, in addition to the exceptional impact of the fall of the yen, several other factors contributed to this situation, such as the accelerated demographic decline of the archipelago and the chronic low productivity.

“After having given up second place to China, behind the United States, in 2010, Japan is now leaving third place”, lamented the main Japanese economic daily Nikkei, in an editorial published on Saturday.

“Japan has not made any progress in increasing growth potential. This situation should serve as a warning to accelerate economic reforms that have been neglected”, added the newspaper.

Like Germany, Japan is an industrial and exporting power, but this status has long been in decline and domestic consumption is currently being harmed by inflation and the falling yen.

Japan refuses to comment on intervention after yen depreciation, which exceeded 150 units per dollar

In the fourth quarter, Japan’s GDP contracted again (-0.1% quarter-on-quarter, in seasonally adjusted real terms), the second consecutive decline after a sharper fall in the July-September period (-0.8 %, according to a downwardly revised value).