Japan’s Economy Falls Behind Germany, Loses Third Place in World Rankings
Japan’s economy suffered a recession at the end of 2023, resulting in a lower annual gross domestic product (GDP) than Germany. The latest figures show Japan’s GDP at 4.21 billion dollars compared to Germany’s 4.46 billion. This drop has caused Japan to lose its position as the world‘s third largest economy.
While many may see this as an unexpected change, Germany’s rise to third place was actually among the forecasts of the International Monetary Fund last October. At that time, Japan was projected to have a GDP of 4.23 billion, indicating a decline from previous estimates.
The decline in Japan’s GDP is attributed to a 0.4% decrease in GDP between October and December, with a larger drop of 3.3% reported between July and September. This decline is the result of reduced private consumption by 0.9% on an annualized basis, as well as a 0.3% decrease in business investment. Despite this, the country did see growth in exports and imports, providing some hope for economic recovery.
Analysts are warning of a further contraction in the first quarter of 2024, due to decreased demand from China, stagnant consumption, and production issues at Toyota Motor Corporation.
Meanwhile, Germany’s rise to third place in the global economy comes at a time of its own economic struggles. Manufacturing output has been on the decline since 2017, and Germany’s GDP fell by 0.3% in 2023 compared to the previous year. The country experienced the largest capital outflow in its history, indicating significant economic challenges.
Long-term forecasts suggest that India’s constant GDP growth will allow it to overtake both Japan and Germany by fiscal year 2028, making it the world‘s third largest economy. As Japan and Germany face economic setbacks, India is set to rise in the global rankings.