Japan grew by 1.9%, Germany fell by 0.3%, why did Germany's GDP surpass Japan to become third?

Japan's GDP was overtaken by Germany and fell out of the top three in the world, which is very hot. Japan fell out of second place in the world in 2010, when China overtook Japan to become the world's second-largest economy.

As early as January this year, Germany released data showing that its GDP was 4.12 trillion euros, down 0.3% year-on-year, or about $4.45 trillion. Japan also released data yesterday, with a GDP of 591.48 trillion yen, up 1.9% year-on-year, or about $4.21 trillion.

I don't think some netizens understand, saying that Japan's GDP is growing positively, and Germany is negative, so why can Germany still surpass Japan?

In fact, it is very simple, the GDP announced by all countries in the world is nominal GDP, which means that there is a nominal growth rate. However, the economic growth rate announced by various countries is often the actual growth rate, such as Japan's growth rate of 1.9% and Germany's decline of 0.3%, both of which are real growth rates.

So what is their nominal growth rate? In fact, it has also been announced, but many people have not paid attention to it. In 2023, Germany's nominal growth rate will be 6.3%, and Japan's will be 5.7%, Germany's nominal growth rate will exceed Japan's, so it is normal for its nominal GDP to be higher.

I read that the Japanese media "Nikkei Chinese Network" published an article entitled "Japan's nominal GDP fell out of the world's top three, the growth rate surpassed China for the first time in 46 years", and China's nominal GDP growth rate in 2023 will be 4.6%, lower than Japan's. Of course, it is also lower than the mainland's actual growth rate of 5.2%, mainly because our CPI has been falling last year and is on the verge of deflation. However, Japan's GDP was overtaken by Germany, and it was very speechless to have to get involved with China to regain a little face.

So what is the difference between nominal GDP and real GDP?

Nominal GDP is easy to understand, it is calculated by the current price. Generally, the higher the inflation rate, the higher the price, and the higher the nominal GDP. Germany's annual inflation rate of 5.9% in 2023 is still at a very high level, while Japan's inflation rate is 3.2%, which is much lower than Germany's.

To give a simple example, if a loaf of bread used to sell for 60 yen in Japan and 1 euro in Germany, but now a loaf of bread in Japan has risen to 80 yen, but in Germany it has risen to 1.5 euros.

Real GDP is calculated according to the real growth rate, and when our National Bureau of Statistics releases economic data, it will mention how much it will increase at "constant prices". The constant price is a price base, and then calculated on the basis of annual growth, and we are still based on the 1990 base. If you really don't understand, you can go to the Internet to search for GDP statistical methods.

In addition, there is another factor, and that is the exchange rate, because the GDP of each country is converted into US dollars, and then compared to make comparisons. In 2023, the yen will average around 142 against the dollar, depreciating by 7% compared to 2022, which is greater than that of the euro. So, again, German GDP dominates here.

In fact, the German economy is in recession, the Japanese economy is growing, and Germany's GDP surpasses that of Japan, which is a bit of a "victory without force", and the Japanese media are still very unconvinced, giving Germany the title of "Europe's sick man".

However, the severe depreciation of the yen also reflects the fact that the Japanese economy has been in a slump for a long time. In 2000, Japan's GDP was 2.5 times that of Germany, and from 2000 to 2022, the average real growth rate of the German economy was 1.2%, compared to Japan's 0.7%.

This shows that in the past 20 years, Germany's economic development has been better than Japan's, from a gap of 2.5 times, to catch up now. Even if 2023 is not victorious, it is not ruled out that the next few years will truly achieve transcendence.

Of course, some people say that it is useless to look at the total GDP, but still to look at the per capita. In 2022, Germany's per capita GDP will be 48,700 US dollars, and Japan's will be 33,800 US dollars, the gap is still quite large, and Japan's per capita GDP is almost surpassed by South Korea. Japan has been stagnant for so many years, and there will always be someone who will develop faster than it, and India is the next opponent to overtake.