Japan lost its symbolic title of third world economic power to Germany in 2023, notably under the effect of the fall of the yen, according to a first estimate of Japanese gross domestic product (GDP) published Thursday February 15.
Japan’s nominal GDP in 2023 amounted to some $4.2 trillion, compared to around $4.5 trillion for Germany, whose nominal GDP was boosted by inflation, which remained high last year in the country. But in real terms, that is to say without the bias of inflation, Japanese GDP accelerated last year (+ 1.9%, compared to 1% in 2022), while the German economy is It contracted by 0.3% according to official data published in January.
An exporting powerhouse, Germany is suffering from weak external demand, energy costs for its large manufacturing sector and interest rates raised by the European Central Bank (ECB) in a bid to beat inflation.
The deterioration of the economic situation in Germany means that its new title of third economic power in the world, which was promised to it since last October by the forecasts of the International Monetary Fund (IMF), is perceived as a sham across the Rhine.
India bides its time
Especially since India could overtake both Japan and Germany within a few years, still in nominal GDP denominated in dollars. The bubbling economy of the new most populous country on the planet could reach their height as early as 2025, according to Brian Coulton, economist at Fitch Ratings interviewed by AFP. But “obviously, Indian GDP per capita will remain much lower than those of Germany and Japan,” he said.
In Japan, local media have extensively commented on the country’s loss of its third economic ranking in the world, recalling that beyond the exceptional impact of the fall of the yen, powerful negative fundamental factors are at work, such as the accelerated demographic decline of the archipelago and the chronic weakness of its productivity.
“After having ceded second place behind the United States to China in 2010, Japan is now also giving up third place” lamented the major Japanese economic daily Nikkei in an editorial published last Saturday. “Japan has not made progress in increasing its own growth potential. This situation should be a wake-up call to accelerate economic reforms that have been neglected,” the Nikkei added.
Like Germany, Japan is an industrial and exporting power, but this status has been losing momentum for a long time and its domestic consumption is currently undermined by inflation and the fall of the yen. The decline of the Japanese currency continued last year (-7% against the dollar). It mainly comes from the gap between the drastic monetary tightening carried out in the United States and Europe since 2022 and the maintenance by the Bank of Japan (BoJ) of its ultra-accommodating course.
“Japan must carry out more structural reforms” agreed Thursday the Japanese Minister of Economic Revitalization Yoshitaka Shindo, also emphasizing the need to achieve wage increases corresponding to inflation.
Japan enters recession
In the fourth quarter, Japanese GDP contracted again (-0.1% over one quarter in real data adjusted for seasonal variations), a second decline in a row after a more marked decline over the July-September period ( -0.8% according to a figure revised downwards on Thursday).
Japan is thus experiencing a technical recession, a slight surprise given that the consensus of economists from the Bloomberg agency had predicted a slight rebound of 0.2% in the fourth quarter. The country’s industrial production in December was also revised downwards (+1.4% over one month compared to +1.8% initially), according to an indicator published separately on Thursday.
Faced with this disappointing picture, “the Bank of Japan will probably become even more cautious” regarding the start of its monetary tightening expected this year and which already promised to be extremely gradual, reacted in a note Min Joo Kang, economist at the Dutch bank ING.
A first increase in BoJ rates – an unprecedented event since 2007 – could now no longer take place in March-April, but rather in June or even in the third quarter, if growth picks up again as expected at the start of the year, he said. he adds. The IMF predicts moderate economic growth in Japan this year (+0.9%).