Japan slips to 4th; lost position as world’s third-largest economy to Germany

Japan’s nominal Gross Domestic Product for 2023 came to 591.5 trillion yen, or some 4.2 trillion dollars based on last year’s average exchange rate. Germany’s preliminary GDP surpassed Japan’s to stand at nearly 4.5 trillion dollars.

Earlier, Japanese economy was the world’s second largest for decades from 1968. But China surged past in 2010, leaving Japan third until 2022. Germany’s population is about two-thirds the size of Japan’s.

Since Japan’s economic bubble burst in the early 1990s, prolonged slow growth and deflation have curbed both consumer spending and corporate investment.

While the weak yen lowers the value of Japan’s economy in dollar terms, higher inflation in Germany has helped boost nominal German GDP growth.

Analyst say Japan’s latest GDP figures show that the country’s economy shrank in the October-to-December period. The second consecutive quarterly contraction came on the back of weak domestic demand.

According to Kanda Keiji, Senior Economist at Daiwa Institute of Research longstanding issues continue to pose a challenge for Japan’s economy.