According to reports from Bloomberg and Kyodo News Agency on October 24th, Germany is expected to replace Japan as the world's third largest economy in 2023, thanks to the depreciation of the yen against the US dollar and euro.
The International Monetary Fund (IMF) recently predicted that Japan's nominal gross domestic product (GDP) will fall from third to fourth in the world in 2023, which will be surpassed by Germany. The economic forecast data released by the IMF shows that Japan's nominal GDP in 2023 is approximately $4.2308 trillion, a decrease of 0.2% compared to the previous year. On the other hand, Germany grew by 8.4%, with a nominal GDP of approximately $44298 trillion.
According to Japanese media, the depreciation of the yen has led to a decrease in GDP converted into US dollars. In addition, nominal GDP is affected by price fluctuations, and Germany's higher price increase than Japan will also be reflected in the ranking.
According to data from the Bank of Japan, the average exchange rate of the Japanese yen against the US dollar in the Tokyo foreign exchange market in 2022 was around 131.5 yen per dollar, and has recently depreciated significantly to around 150 yen; At the same time, the exchange rate of the euro against the US dollar has not changed as much as the Japanese yen. On a monthly basis, the price increase in Japan will remain roughly above 3% year-on-year in 2023; On the other hand, Germany reached around 9% at the beginning of the year and gradually slowed down to over 4% in September.
Japanese media admit that GDP is greatly affected by the exchange rate, and the actual ranking will be affected by the exchange rate movements before the end of the year. However, Japan's low economic growth has been a long-term sustained phenomenon. The economic scale is linked to international influence, and once overtaken by Germany, Japan's sense of presence will further decrease.
In US dollars, Germany's economy will surpass Japan's since the beginning of this year, "according to Bloomberg (black line - German GDP, yellow line - Japanese GDP)
On the 24th, Japanese Minister of Economy and Industry, Yasuo Nishimura, admitted when asked about the IMF's estimated results; Japan's economic growth potential has indeed fallen behind and remains sluggish
He said, "We want to regain the lost land of the past 20 to 30 years and hope to achieve this goal through measures such as the upcoming package plan." Japanese Prime Minister Fumio Kishida said on the 23rd that the economic stimulus plan includes extending energy subsidies, aimed at helping alleviate Japan's most severe inflation caused cost of living crisis in decades.
American media analysis suggests that the weakness of the yen is largely caused by fundamental differences in monetary policies among countries. The Federal Reserve and the European Central Bank have continuously raised interest rates from their lows during the pandemic to cope with inflation. After years of deflation, the Bank of Japan's monetary policy still maintains a stimulus model, aiming to drive price growth.
The Federal Reserve and the European Central Bank are expected to keep interest rates unchanged at their upcoming meetings. There is also speculation from the outside that the Bank of Japan may fine-tune its control over bond yields at next week's meeting, but it is widely expected that the negative interest rate policy will not end until next year.