Germany is expected to replace Japan as the world's third largest economy in 2023.
According to the International Monetary Fund (IMF) forecast, Japan's nominal GDP will drop from third to fourth in the world in 2023. Forecast data shows that Japan's nominal GDP in 2023 is approximately $4.23 trillion, while Germany, which is about to surpass Japan, is about $4.43 trillion.
Liu Ying, a researcher at the Chongyang Institute of Finance at Renmin University of China and director of the Cooperative Research Department, told the Governor of Chang'an Street (WeChat ID: Capitalnews) that the lack of innovation is the focus of Japan's sustained economic downturn, and it is inevitable that it will be countered. This counterattack will have a serious impact on Japan's "glass heart".
Liu Ying believes that the background of Japan's GDP being surpassed by Germany is the overall trend of global economic growth rate "rising in the south and falling in the north" and "rising in the east and falling in the west".
In US dollars, Germany's (black line) economy will surpass Japan's (yellow line) economy this year
The fundamental reason is not the depreciation of the yen
According to Japanese media analysis, the average exchange rate of the Japanese yen against the US dollar has recently significantly depreciated to around 150 yen per dollar, while the depreciation of the euro against the US dollar is not as severe as the Japanese yen. The depreciation of the Japanese yen has led to a contraction in GDP after converting it into US dollars; In addition, nominal GDP is influenced by price fluctuations, with Germany experiencing higher price increases than Japan, which also has an impact on rankings.
Is the Japanese economy being overtaken by Germany just a matter of yen depreciation and price fluctuations? In fact, Japanese media have also admitted that the sluggish economic growth in Japan has been a long-term phenomenon.
Liu Ying believes that, in addition to the direct factors mentioned above, the fundamental reason for Japan's GDP being surpassed by Germany is still the problems existing in the Japanese economy itself, with the most core being the lack of vitality.
Abenomics proposed the "new three arrows" of "increasing wealth by raising wages, relying on small and medium-sized enterprises to drive exports, and" wisdom "as the treasure trove of wealth creation" in an attempt to stimulate economic growth. However, despite the arrows, the Japanese economy has not truly emerged from the downturn.
On the one hand, Japan is limited by the "inherent conditions" of insufficient land and natural resources, while the problems of fewer children and an aging population are serious, further leading to a shortage of labor force, insufficient consumption, and inadequate investment, resulting in a sustained economic decline.
In addition, Japan's lack of innovation and economic growth momentum has become a "fatal blow". The two countries with the most unicorn companies in the world are the United States and China, with few Japanese companies visible. Moreover, traditional industries in Japan have been basically overtaken, while innovative industries such as the digital economy have performed mediocrely.
Japan is currently the only country in the world to adopt unconventional monetary policies, attempting to improve its economy through extreme stimulus. However, due to insufficient economic momentum, any amount of monetary and fiscal policy stimulus may be in vain.
In fact, before the prediction that Germany's GDP exceeded Japan's this year, Japan's per capita GDP had already declined year by year. Japan's per capita GDP was originally higher than that of developed economies in the United States and Europe, but according to statistics, it is currently at the bottom of the Group of Seven, and even South Korea has surpassed Japan. Liu Ying believes that in the long run, it is inevitable that Japan's economic aggregate will fall out of third place and fall after Germany, and this trend is also difficult to change.
The psychological impact is greater than the last time
Faced with the reality that Germany is about to overthrow Japan, the Japanese political community is quite helpless. Japan's economic growth potential has indeed fallen behind and remains sluggish, "Japan's Minister of Economy, Industry, and Industry, Yasuo Nishimura, said on the 24th
Japanese Prime Minister Fumio Kishida said on the 23rd that he hopes to help alleviate the cost of living crisis for Japanese people through measures such as the upcoming package plan. The economic stimulus plan includes extending energy subsidies. We want to reclaim the lost land of the past twenty or thirty years, "he said.
However, the Japanese public seems to have lost confidence and expectations in the government's economic stimulus plan. A recent poll by Kyodo News Agency showed that the support rate for the Kishida Cabinet was only 32.3%, setting a new low since the formation of the cabinet in October 2021. 58.6% of respondents expressed "no expectation" for the upcoming economic measures to be implemented by the government.
Liu Ying pointed out that the news of Germany's economy surpassing Japan this time is not only a "blow" issue for Japan, but will be a strong "shock".
In the last century, Japan, which was once known as the 'world's number one' economy, had a brief period of glory. It did not take any country seriously and was once 'buy and buy' in the United States. Many high-rise buildings in New York were in Japan's possession. However, with the decline of the Japanese economy, these properties returned to their original owners. In the second decade of this century, the Japanese economy was overtaken by China. If China had surpassed Japan at that time, Japan also had the advantage of 'China's large population' Kou, so this time Germany is overtaking Japan, Japan will be speechless, because Germany's population is less than 70% of Japan's, and Japan's already serious' glass heart 'may suffer a heavier impact Liu Ying said.
Regarding the upcoming macro policy stimulus measures by the Japanese government, Liu Ying believes that both Abenomics and the subsequent economic policies of the Kishida government may be at the end of their tether, or it is difficult to escape the law of diminishing marginal benefits and stimulate economic growth. The continued decline of the Japanese economy is still a likely event.
The general trend is to rise in the south and fall in the north, and rise in the east and fall in the west
Behind Japan's sluggish economy is a slowdown in economic growth in the entire developed economy. In fact, while the IMF lowered its global economic growth expectations, it lowered the growth expectations of developed economies such as the United States to almost halve, while maintaining growth rates of over 4% in emerging markets and developing economies.
Liu Ying believes that the global economy is in a trend of "rising in the south and falling in the north" and "rising in the east and falling in the west", and this trend will continue. Developing countries and emerging economies are more driven by economic growth, with greater vitality and potential in terms of labor, land, technology, and innovation. Relatively speaking, developed country economies have some connotations of "elderly people".
At the same time as developed countries experience insufficient growth, they are increasingly moving towards closure. In fact, the two are precisely mutually reinforcing - the economic weakness of some developed countries has led to anti globalization lockdown trends, promoting trade protectionism and unilateralism measures, which in turn further limit their economic development.
Some countries are not trying to solve their own development problems, but rather keen on building high barriers, imposing trade restrictions, suppressing technology, and playing zero sum games. This mentality and approach inevitably lead to economic decline.
To get out of the predicament, developed country economies should calm down, open up, adhere to the concept of openness and the path of continuous reform, in order to better integrate into globalization and cooperate with other economies for win-win results. This is the fundamental way out, rather than a vicious cycle between closure and decline, "Liu Ying said. (Source: Governor of Chang'an Street)