Germany Barely Ahead of Japan in GDP... 3rd Place Also 'Shaky'

India Rises to 5th Place Globally, Japan Closely Chasing
Nikkei: "Economic Strength Weakened by Low Birthrate and Aging Population"

Japan's status as the world's third-largest economy is under threat. Due to the impact of the weak yen, last year's nominal gross domestic product (GDP) barely surpassed Germany's, while the emerging economy of India is rapidly catching up. There are even forecasts that Japan's economy could fall to fifth place globally within the 2020s.

Japanese media outlet Nihon Keizai Shimbun (Nikkei) reported on the 19th (local time) that when applying the average annual exchange rate to convert last year's nominal GDP of Japan and Germany, the figures were $4.23 trillion and $4.06 trillion respectively.

The GDP gap between the world's third and fourth largest economies was only $170 billion. This marks the third consecutive year the gap has narrowed, following $1.15 trillion in 2020 and $670 billion in 2021. If Germany's growth rate continues to surpass Japan's, it could overtake Japan within a few years.

Tokyo Port, Japan / Photo by Yonhap News

According to the media, 20 years ago Japan's nominal GDP was more than twice that of Germany. However, over the past two decades, Japan's GDP grew by only 1.2%, while Germany's grew by nearly 95.2%, almost doubling in the same period.

The sluggish growth of Japan's nominal GDP is attributed to exchange rate instability and low inflation. Despite global inflation surges last year, the Bank of Japan maintained its quantitative easing policy, resulting in the yen-dollar exchange rate hitting its lowest level in 32 years as of October last year. Since nominal GDP is calculated by converting each country's currency figures into US dollars, the weak yen negatively affects Japan's GDP ranking.

Low inflation is also a factor hindering GDP growth. Typically, nominal GDP is influenced by real GDP and the GDP deflator (an indicator of price levels). Last year, the GDP deflator was 5.1% for Germany and only 0.2% for Japan, showing a significant difference.

Japan is not the only country chasing the 'top three economies' status. According to US financial media Bloomberg, India recorded a nominal GDP of $3.535 trillion last year, surpassing the UK ($3.376 trillion) and entering the world's top five economies.

The International Monetary Fund (IMF) projected India's growth rates at 6.8% for last year and 6.1% for this year. Bloomberg forecasts that if India maintains this high growth, it could surpass the GDP of Japan and Germany by the late 2020s.

Japan's nominal GDP ranking has been declining since it overtook West Germany in 1968 to become the world's second-largest economy for the first time in history. In the first quarter of 2010, China took over the second spot, and in the near future, it is uncertain whether Japan can even maintain its third or fourth place.

Regarding this, Nikkei pointed out, "The fundamental economic strength has weakened due to low birth rates, aging, and population decline. The depreciation of the yen has sharply increased resource import costs, worsening the profitability of export products." It added, "For Japan to maintain a certain status in the global economy, it is necessary to completely escape deflation and restore corporate profitability."

This content was produced with the assistance of AI translation services.