Is Japan's GDP ranking third in the world at risk?


Japan's previously maintained position as the world's third largest gross domestic product (GDP) "is becoming dangerous.". Due to long-term and sustained deflation and the current rapid depreciation of the yen against the US dollar, the gap between Germany, the fourth largest country in the world, and nominal GDP in US dollars, is rapidly narrowing. In addition, India is also catching up, and Japan's sense of presence in the world economy is declining. According to the report of Nihon Keizai Shimbun on March 13, the paper compared the nominal GDP of Japan and Germany in 2022 by multiplying the annual average exchange rate. Japan's dollar denominated GDP is $4.23 trillion, while Germany's is $4.06 trillion, a difference of only $170 billion. The gap between the two countries was $1.15 trillion in 2020 and $670 billion in 2021. In 1968, Japan surpassed West Germany in terms of gross national product (GNP), ranking second only to the United States among capitalist countries. In 2002, Japan's nominal GDP was $4.18 trillion, more than twice the size of Germany ($2.08 trillion). The main reason for the narrowing of the gap between Japan and Germany is the depreciation of the yen. In 2022, influenced by the US interest rate hike, the US dollar continued to appreciate, and the exchange rate of the Japanese yen against the US dollar once hit a new low in 32 years. The euro has also depreciated against the dollar, but the yen has depreciated even more. In terms of nominal GDP, the higher the price increase, the larger the amount will become. The GDP deflator, which is observed to show the trend of domestic comprehensive prices, is 5.1% in Germany and only 0.2% in Japan based on the inflation rate in 2022. Due to the high resource prices and the chaos of the supply chain caused by the spread of the COVID-19 epidemic, global inflation has intensified. Affected by weak domestic demand, it is difficult for Japan to fully pass on costs, and domestic price increases are limited. Compared to 20 years ago, Germany doubled its nominal GDP in dollar terms, but Japan only grew by 1%. The United States, which doubled 20 years ago, ranked first in the world with $25 trillion, while China, which doubled 12 years ago, ranked second with $18 trillion. Observing the situation in Japan and Germany, it is found that Germany's real GDP has increased to 1.3 times, prices have increased to 1.4 times, and the exchange rate has become a driving factor of about 10%. Japan's real GDP has only increased to 1.1 times. Due to long-term and sustained deflation, prices have decreased by 6% and the exchange rate has decreased by 5%, respectively, which have become factors driving down GDP. There is a lack of structural growth potential in Japan. The situation of importing large amounts of energy and resources from overseas has not changed, and the increase in resource prices has led to an increase in imports. The competitiveness of the electronics industry has weakened, and the profitability of commodity exports has also declined. The aging of young children and population decline are intensifying, and the basic "physical strength" is declining, which has a significant impact. Behind Japan and Germany, India, which maintains rapid growth, is catching up. According to United Nations calculations, India has surpassed China in population, becoming the country with the largest population in the world. The International Monetary Fund (IMF) predicts that by the second half of the 2020's, India's GDP will exceed that of Japan and Germany. Japan has introduced large-scale economic countermeasures again. According to the Yomiuri Shimbun report on October 29, 2022

Edit:Hou Wenzhe Responsible editor:WeiZe

Source:Reference News

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