Recent data will show Japan as the world’s fourth-largest economy due to a weaker currency and an older population.
This change highlights a significant shift. Even with an expected 1.2% growth rebound in the last quarter, Japan’s yearly output now trails Germany’s.
India is likely to outdo both soon.
Japan once aimed to top global economies. Now, its fall to fourth place sparks national debate on its future path.
The response is milder than when China’s economy grew fourfold past Japan’s in 2010. This is partly because currency shifts blur comparisons.
Germany’s struggles and Japan’s potential economic revival also play a role.
Upcoming positive economic indicators may prompt Japan’s central bank to raise interest rates, a first since 2007.
Hideo Kumano points out that currency trends majorly impact Japan’s GDP.
From 2012 to 2023, Japan’s economy shrank to $4.2 trillion from $6.3 trillion, mainly due to the yen weakening.
Despite this, in yen terms, the economy expanded by over 12%.
Germany’s situation doesn’t directly mirror Japan’s.
News of Germany outpacing Japan hasn’t made much impact there, where economic policy dissatisfaction, inflation, and stagnant growth persist.
Japan and Germany share challenges, such as aging populations and reliance on exports. However, with a booming working-age population, India is set to leapfrog both economies.
Japan’s demographic decline exacerbates labor shortages, influencing its economic reliance on external markets.
India’s growth prospects shine, backed by a youthful workforce poised to enhance production and innovation.
Prime Minister Modi’s incentives
The subcontinent’s push for economic liberalization and investment could give it an advantage over China. Prime Minister Modi’s incentives aim to make India a manufacturing hub.
Japan seeks growth by investing in semiconductor production, aiming to triple domestic semiconductor sales by 2030.
Despite slipping in global rankings, Japan maintains a stable living standard, supported by its GDP per capita.
Yet, Japan must attract more workers to sustain production, consumption, and tax revenues. Opening doors to foreign workers is a step towards tackling this issue.