Japan, the rankings have fallen! The next time it is "surpassed" may come soon

On the 15th local time, the preliminary statistics released by the Cabinet Office of Japan showed that Japan's real gross domestic product (GDP) will increase by 1.9% year-on-year in 2023, and the nominal growth rate of GDP, which reflects rising prices, will be 5.7%. Japan's preliminary GDP statistics for 2023 are 591.482 trillion yen, or about $4,210.6 billion, lower than Germany's $4,456.1 billion. Japan's nominal GDP fell from third to fourth place in the world, overtaken by Germany.

In the face of an aging population and a slowdown in industrial innovation, Japan's economy has been in a state of weakness for a long time. The direct cause of being surpassed by Germany this time seems to be an accidental exchange rate problem, but the deep reason is gradually becoming apparent. In addition, Japan may be poured more than one "basin" of cold water, and the International Monetary Fund (IMF) predicts that in 2026, Japan's GDP is likely to be surpassed by India, falling further to the fifth place in the world. If it comes true, Japan will be worse off, how can the economic decline be reversed?　

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Japan GDP 赶超

The inevitability behind the accident

For Germany, Japan has always been the focus of its economic development. After the end of World War II, West Germany's economy rose rapidly, and at one point it ranked second in the world.

However, with the take-off of the Japanese economy in the 60s of the 20th century, Japan surpassed the then West Germany in 1968 to become the world's second largest economy. Since then, the economic gap between the two countries has gradually widened, and by 2000, Japan's economy had jumped to 2.5 times the size of Germany, making it difficult for Germany to match it.

Time has passed, and in 2024, Japan's "myth" has finally been overtaken by Germany.

However, the current German economy does not seem to be "surpassing Japan's" in the sense of excitement. In mid-December 2023, Markus Steilemann, president of the German Chemical Industry Association, expressed a sense of crisis, "We are at a deep and long trough". A growing number of companies in Germany do not expect the business environment to improve until 2025.

Is the German economy, which has been directly affected by the Ukraine crisis, really growing? In fact, this is because the Japanese economy has been "going downhill" for many years.

-- Exchange rates are a key factor

In October 2023, the IMF announced that Germany's GDP would surpass Japan's. At that time, the yen had been hovering around 150 against the dollar, almost falling to a 33-year low, and although it recovered slightly around January 2024, it then fell to around the 150 mark.

The Nihon Keizai Shimbun pointed out that Germany's GDP catching up with Japan this time occurred when the economies of both countries were in a state of low growth. Germany's real growth rate in 2023 is minus 0.1%, affected by high inflation triggered by the Ukraine crisis and the European Central Bank's rapid interest rate hikes. According to statistics from the German Economic Advisory Council, Germany's potential growth rate in 2022 is 0.4%, which is even lower than Japan's 0.5%.

Japan's Mitsubishi UFJ research institute also analyzed that in addition to the depreciation of the yen, rising prices and the appreciation of the euro against the dollar have also pushed up Germany's GDP. Assuming that the price factor in the euro exchange rate and the nominal GDP of Japan and Germany is certain, and that the exchange rate between the dollar and the yen is about 1:132 before the sharp depreciation of the yen, the GDP of Japan and Germany should be at the same level.

- "Struggling in a sluggish economy"

"At the end of the 80s of the 20th century, the Japanese were richer than the Americans, and now they do not earn as much as the British. This is the BBC's description of the current economic situation in Japan on January 24. "Japan has struggled with a sluggish economy for decades and is reeling in strong resistance to change and stubborn attachment to the past," the report said. ”

Although there was a certain chance that it was overtaken by Germany this time, the Japanese economy collapsed after experiencing a "bubble burst" in the late 80s of the 20th century. "Nihon Keizai Shimbun" pointed out that for more than 20 years, Japan has blindly relied on monetary easing and fiscal stimulus to stimulate demand, and the metabolism of the industrial structure has been slow, but during this period, the production efficiency of major European and American countries has improved a lot.

One of the main reasons for Japan's GDP overtaking this time, the depreciation of the yen, is also due to the fact that the Japanese economy has not been able to improve its growth power.

The report also cited data from the Organization for Economic Co-operation and Development (OECD), which pointed out that in terms of annual working hours per capita, Japan will have 1,607 hours in 2022, 20% more than Germany. According to the World Bank's 2022 data, Japan's real GDP per capita for working-age people aged 15 to 64 is about $61,600, 10% less than Germany.

In other words, the Japanese labor force has worked relatively longer hours and has not produced better results.

This is also reflected in the economic data. Japan's "Asahi Shimbun" pointed out that in the long run, Germany's economic growth rate obviously exceeds that of Japan, and the gap between the economic scale of the two countries is also narrowing year by year. According to the IMF, the average real growth rate of the economies of the two countries between 2000 and 2022 was 1.2% in Germany and only 0.7% in Japan.

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There is an "ambush" in front, and a "chasing soldier" in the back

The next time "being surpassed" is coming soon?

According to the analysis, the continued economic decline is expected to further decline Japan's global influence. For Japan, the only way to achieve a "reversal" is to continuously strive to improve production efficiency.

Japan's former Minister of Economy, Trade and Industry, Yasunori Nishimura, once responded to the question that GDP could be overtaken by Germany, saying, "Japan's growth potential has indeed lagged behind and remains sluggish." Nishimura said Japan wants to use a package to regain the economic status it has "lost" in the past 20 or 30 years.

However, in the face of the declining birthrate and aging population, it is not easy to improve labor productivity, which is at a low level.

The Nihon Keizai Shimbun believes that both Japan and Germany are moving towards aging, and the downward pressure on the economy caused by the shortage of labor is huge. In order to accelerate growth again, it is necessary for Japan to continue to tap the potential of the elderly workforce, including through the full realization of equal pay for equal work. In addition, it is also important to further attract foreign investment.　

However, the outlook does not seem to be encouraging.

The IMF predicts that Japan's next "overtaking" may soon come: India will become the world's fourth-largest economy by 2026, and Japan's total GDP will fall again to the world's fifth.

If the prediction comes true, this will be tantamount to pouring "cold water" on the head of the Japanese economy, which is already struggling in the quagmire.

Source: China News Network