Japan Slumps, Economy Falls to Fourth: Germany Surpasses Japan in World Rankings
Japan’s economy has been in a continuous slowdown for the past two quarters, leading it to slip from the third to the fourth position in the world economy rankings. Germany has now become the world’s third-largest economy.
Japan is currently grappling with weak trends, an aging population, and declining demographics. Back in 2010, Japan slipped to the third position due to China’s economic growth. The United States currently holds the top spot in the world economy rankings.
Japanese Economy Contracts by 0.4% in the Latest Quarter
According to data released by the Cabinet Office of Japan, the country’s GDP contracted by 0.4% more than expected in the last three months of 2023. The economy had experienced a decline of 3.3% in the previous quarter.
A contraction in the economy for two consecutive quarters is defined as a recession. When any country’s economy contracts steadily for two consecutive quarters, it is technically considered a recession. In October, the International Monetary Fund warned that Germany could become the world’s third-largest economy.
The Japanese economy is approximately $4.2 trillion. Economist Neil Newman’s estimates indicate that Japan’s economy will hover around $4.2 trillion in 2023, while Germany’s economy is expected to reach $4.5 trillion.
Causes of Recession in Japan
The yen’s continuous weakening against the dollar contributes to Japan’s economic downturn.
A weak yen reduces profits in exports.
Japan is also grappling with labor shortages and a declining birth rate.
The weakness of the yen benefits some major companies.
However, the depreciation of the yen helps boost the competitiveness of the country’s exports in foreign markets. The Nikkei Stock Exchange has also surpassed the 38,000 mark since 1990.
