The economic size of countries around the world is very different, GDP is closely related to population, economic efficiency, science and technology, resource endowment and many other factors, the mainstream economy in the United States and China occupy the first and second thrones, there is no possibility of change for a long time in the future, but in recent years the top ten rankings have changed frequently.
For example, in 2021, Russia's GDP ranked eleventh in the world, and South Korea entered the world's top ten for the first time; At the end of 2022, we found that Russia returned to the top 10 in nominal GDP and placed in eighth place, while South Korea was "kicked" out. As a result of Russia's ranking changes, Italy and Canada's GDP rankings have moved in and out.
For example, India's rapid economic development has now surpassed the United Kingdom to rank fifth in the world, and India's economic growth rate in 2023 will inevitably be higher than that of the United Kingdom, which can only continue to rank sixth.
In the first quarter of this year, the global economic pattern has undergone a big change, Germany's nominal GDP in 2023 surpassed Japan, the third and fourth exchanged seats, is the third place of the world's second largest economy in Asia really replaced by the largest economy in Europe? Let's start with the nominal GDP data for the first quarter of the two countries.
In the first quarter of 2023, Japan's nominal GDP was $1,074 billion, and Germany's was $1,076.7 billion, and in terms of numbers, Germany was $2.7 billion more than Japan, which did temporarily surpass Japan, and there is nothing to question.
However, the economic growth rate "betrayed" Germany. According to the data, Germany's real GDP growth rate in the first quarter was -0.1%, that is, not only did not grow, but slightly declined. On the other hand, Japan's GDP growth in the first quarter of this year was positive, although it was not much, but the actual growth rate was 1.3%.
This is very magical, the country that originally ranked third in terms of economic aggregate had positive economic growth in the first quarter, and the fourth country fell slightly, but the nominal GDP of the latter exceeded the former, is it a falsification of German data? No, there are two reasons why such a magical phenomenon occurs.
First, Germany's nominal GDP is supported by high inflation.
Nominal GDP and real growth do not correspond to each other, and the nominal growth rate obtained after adding price increases on the basis of real growth corresponds to nominal GDP, which means that inflation is conducive to the growth of data from the perspective of nominal GDP.
Japan has always been a low-inflation country, even if the Bank of Japan has been adopting a very aggressive monetary easing policy, almost never raising interest rates, and regularly maintaining zero interest rates, but Japan's prices cannot rise, which is related to the low consumption desire of local people and aging.
Germany, on the contrary, began to fall into high inflation in Europe in 2022, and even with the continuous interest rate hikes, it still did not achieve the desired effect, and the average inflation rate in Germany in the first quarter exceeded 7%, bringing its GDP growth rate to 6.6% in nominal terms. In other words, a portion of Germany's nominal GDP is driven by rising prices and does not really create that much real wealth.
Japan suffers greatly from this point, low inflation makes its nominal growth rate not much different from the real growth rate, and nominal GDP cannot obtain the "dividend" brought by rising prices.
Second, the yen depreciated more severely, dragging down Japan's dollarized GDP figures.
In addition to the "loss" in inflation, Japan's nominal GDP in the first quarter was also greatly affected by the exchange rate. From January to March 2023, the US dollar began to appreciate again, and the currencies of several East Asian countries depreciated against it, and the yen was no exception. On the other hand, the exchange rate of the euro against the dollar has not changed much, and even appreciated somewhat.
Germany and Japan use their own currencies to calculate their GDP, while when comparing the economies of the world, they are accustomed to converting them all into US dollars, and the depreciation of the yen makes Japan's nominal GDP "lower" when converted to US dollars, and the appreciation of the euro makes Germany's GDP "more".
Inflation and exchange rates combined to affect the nominal GDP of Germany and Japan, resulting in Germany being $2.7 billion higher than Japan. This transcendence is full of moisture, and while it is not a deliberate data falsification in Germany, it does not have much practical significance.
In the case of rising prices, inflation can indeed temporarily boost nominal GDP, which in the long run can damage a country's economy. Just like the exact same water pen, it sold for 2 yuan last year and 3 yuan this year, and this year's sales have increased by 50% compared to last year with the same number sold. However, the price increase may mean a sharp decline in sales, if other merchants still sell 2 yuan a piece, then this store's water pen sales this year may not even be half of last year, the unit price has gone up, but the sales have gone down.
Therefore, European and American countries strive to curb the rise in prices, and do not hesitate to raise interest rates sharply in succession, even if this approach can easily lead to economic recession. What is certain is that Germany did not rejoice that its nominal GDP surpassed that of Japan in the first quarter, the government knew the "secret", and at the same time, the quality of life of ordinary people declined, and the euro in their hands was less valuable, and they did not care about the rise in nominal GDP.
From the actual performance of the economy, although Japan's nominal GDP in the first quarter is lower than that of Germany, but the actual growth rate is higher, it belongs to winning the lizi and losing face, it is obvious that the lizi is more important, the face is like clothes, can be changed at any time, the lizi is the body, it is really their own thing, it is impossible to replace.
However, Japan has its own problems, that is, it has no potential to tap.
As mentioned earlier, Japan has always adopted a loose monetary policy, and the yen fell below 150 against the US dollar last year, and the Bank of Japan still adheres to the YCC strategy and maintains a low interest rate environment in China. The prolonged easing environment has prevented monetary policy from stimulating Japan's economic take-off and unleashing growth potential.
EU countries, including Germany, are different. This month, the ECB raised interest rates again, raising the main refinancing rate, marginal lending rate and deposit facility rate to 3.75%, 4.00% and 3.25% respectively since May 10, which is already at a fairly high level.
When the prices of European countries are controlled, the European Central Bank will adjust monetary policy, the three key interest rates will be gradually reduced, the loose monetary environment is conducive to economic development, and countries such as Germany that are mainly manufacturing will benefit a lot, and economic growth potential will explode. Perhaps Germany's nominal GDP will not have so much moisture next time it surpasses Japan's, by which time the world's third-largest economy will officially change hands.