JAPAN is no longer the ‘world’s thirds biggest economy’ after it dropped to the fourth place in the world, and there are two main reasons for this: the depreciation of yen and the economic downturn.
Japan’s nominal GDP growth reached 5.7 percent or equivalent to 4.2 trillion U.S. dollars in 2023 compared with Germany’s nominal GDP growth of 6.3 percent to have reached 4.46 trillion U.S. dollars.
This made the Asian giant the fourth-largest economy behind Germany in terms of the U.S. dollar exchange rate last year.
Toshihiro Nagahama, chief economist at the Dai-ichi Life Research Institute in Tokyo, told CCTV News that Japan’s financial policies have driven the drastic depreciation of the yen and the long-term domestic economic downturn, and are the main reason why Germany’s nominal GDP has surpassed Japan’s.
“The biggest reason is the excessive depreciation of the yen in recent years. In addition, Japan’s economy has been in a long-term slump after the collapse of the bubble economy. Although Germany’s population has decreased, its economy has been growing,” Toshihiro Nagahama, Chief Economist, Dai-ichi Life Research Institute said.
The depreciation of the yen has increased the profits of Japan’s large multinational companies.
However, their foreign income is not included in Japan’s GDP.
Also, a considerable number of Japanese small and medium-sized enterprises are facing operational difficulties due to rising raw material costs and manpower shortages.
“The depreciation of the yen has pushed up the price of imported raw materials, which increased the burden. The domestic labor shortage also makes it difficult for small and medium-sized enterprises to recruit workers. Under such double blow, small and medium-sized enterprises are struggling to maintain their operations,” Nagahama added.
Japan’s increasing aging population and lack of innovation among enterprises are also among the root causes of Japan’s long-term economic weakness.
“Japan will not be effectively competitive if it manufactures the same goods as those in Southeast Asia. Efforts must be made to develop high-value-added goods unique to Japan, and economic development should not be overly dependent [on the United States], we should focus more on Asian countries to achieve balanced development and strive to achieve economic results in a wider range of areas,” he added.
